Education savings accounts, tax-credit scholarships, vouchers, charter schools, home schooling, tutoring, course choice, dual enrollment, and microschools are transforming K–12. In “Talking Choice,” Ashley Berner and I try to make sense of the shifting landscape. Ashley directs Johns Hopkins’ Institute for Education Policy and is a leading authority on “educational pluralism.” Whatever your take on educational choice, we seek to foster a more constructive conversation about what it means for students, families, and educators. Today, we discuss the politics and policy of the new Federal Scholarship Tax Credit, adopted by Congress as part of last summer’s One Big Beautiful Bill Act (OBBBA).
—Rick
Rick: Last summer, Congress created the new Federal Scholarship Tax Credit in the OBBBA reconciliation bill. The tax-credit provision creates a $1,700 dollar-for-dollar federal credit for taxpayers who contribute to a “scholarship granting organization.” As you well know, there are a slew of still-unsorted particulars relating to the program and the rules for how it’ll all work.
Meanwhile, one intriguing development is the question of whether blue state governors will opt into the program. The tax credit wasn’t originally designed to put states in this bind. The original draft of the provision would have simply included all states. To pass muster with the Senate parliamentarian, however, the final legislation was amended so that states could decide whether to opt in.
If states don’t opt in, their taxpayers can still claim the tax credit, but all those dollars will wind up underwriting scholarship programs in other states. As you and I both know, it’s tough for governors to turn away free money—especially when they’re watching it flow to parents in neighboring states. At the same time, Democratic governors are loath to welcome an effort designed to expand private school choice and over which they’ll have limited oversight or authority.
It may not have been intentional, but the tax credit is playing out very clearly as a mirror image of the Medicaid expansion that was such a big part of President Barack Obama’s Affordable Care Act. In that case, Republican governors were promised hefty federal subsidies if they agreed to radically expand their Medicaid programs. Republicans complained that this amounted to coercion, while Democrats were gleeful at the dilemma they’d created for GOP governors.
Now, the roles are reversed, with Republicans cheerfully watching Democratic governors squirm while most Democrats complain. But not all of them. Rather, Jorge Elorza, a former two-term mayor of Providence, R.I., and the head of Democrats for Education Reform (DFER), has helped reenergize his organization by unapologetically urging Democrats to embrace the tax credit. He’s even enlisted former Obama Secretary of Education Arne Duncan in his cause.
Readers won’t be surprised to hear that, on the substance, I agree with Elorza. I’ve always supported full-spectrum educational choice and I view this as a modest but constructive step forward. It’s a chance to provide resources to families ill-served by their current school. That said, I’ve plenty of sympathy for Democratic governors who are feeling sandbagged. After all, 15 years ago, I thought the Republican governors had a strong point when they complained about being sandbagged by Obama on health care or even the Common Core. If one believes in the virtues of federalism and “returning education to the states” (and I do), then this sort of federal bullying is a problem.
But there’s also the question of what DFER’s push tells us about school choice and Democratic politics today. Ashley, I’m curious what you make of this as policy but also when it comes to the politics and principles involved?
Ashley: I admire Jorge’s courage in continuing to push the Democratic Party to expand educational options, particularly for low-income families. Courage is in DFER’s DNA. The group has always challenged the party’s sacred educational cows, such as obeisance to teachers’ unions and resistance to nondistrict schools. Jorge is arguing that access to charter schools should now be extended to include access to private, micro-, and home schools. This is a logical extension but not an easy one for Democrats to accept politically or culturally. Jorge and I have written about why Democrats shouldn’t fear (indirect) funding for religious education, for instance. And to my registered-Independent mind, expanding access to nondistrict options aligns well with progressive priorities, as many left-leaning scholars and activists have argued, and as public policy scholar Joseph Viteritti captures so beautifully in his recent book.
However, even if Democrats could be persuaded of the justice claims of school choice, overcome their attachment to teachers’ union coffers, and accept the political calculus that follows from widespread support for “school choice,” there remains the visceral problem of Donald Trump. If you look askance at the behavior of ICE, the inexperience of his appointees, and the ad hominem attacks that come from the White House on a daily basis, it is hard to contemplate supporting anything that the administration champions. I understand that. It’s not only a problem for Democrats but also for Independents and centrist Republicans.
So, perhaps the real question is whether Jorge can convince Democratic leaders that expanding nondistrict options is not about Trump but about justice. That it’s not about giving the Other Party a win but about what Americans have always believed about social mobility and civic formation. That it’s not about today’s political battles but about tomorrow’s promise.
I hadn’t thought about the Obamacare parallel. But now I’m wondering: Are federal tax credits problematic in general? The feds incentivize all kinds of things through tax credits—from energy-efficient home improvements to some of the costs associated with adoption. Is this just a bad idea that drives polarization, whichever side you’re on? I’ve asked myself more than once, while the scholarship tax credit wound its way through Congress.
Rick: There’s little in your take that I’d quarrel with. So, let me instead respond by noting a couple related points that you’ve got me thinking about. For starters, I think the politics of tax credits play differently when they’re incentivizing states rather than individuals. Whatever one’s take on public policy-via-the-tax-code in general, I think it’s a problem when Washington is increasingly intent on coercing states into making commitments they’d otherwise reject.
One of the ways our federal system has historically allowed Americans to live and let live is by, outside of a handful of core questions, giving the residents of each state much latitude to govern themselves. As that understanding is curtailed, more and more fights become nationalized; they become winner-take-all, putting more and more emphasis on who controls Congress and the White House. As a general principle, separate from the particulars of the scholarship tax credit, that strikes me as a lousy development.
Second, you’re right that the decision about whether to embrace the tax credit will very much depend on how much that decision is regarded as a referendum on Trump. For better or worse (mostly worse), that’s a reality today. Reaction to any policy or proposal will be colored by its most visible supporters, especially if they inhabit the White House. That’s part of the price of pushing proposals onto the national agenda. While Trump’s vocal support helped prompt Republican governors to jump on board, it’s having the opposite effect on Democrats. Right now, those (like DFER) who want Democrats to embrace the tax credit are dealing with that reality. We’ll see how that shakes out.
Third, some of the Democratic hesitance strikes me as sensible. After all, we’ve seen how aggressively both President Joe Biden and Trump have wielded regulatory and investigative powers. I can imagine a Democratic president, in 2029, going after scholarship-granting organizations or participating schools based on allegations of discrimination, self-dealing, or suspect use of funds. Normally, the structure of the program, as a Treasury-administered tax credit, wouldn’t seem to provide an opening for that. But we’ve seen the Trump administration go hard after private colleges in novel ways and send thousands of ICE officers to Minnesota after revelations of massive fraud involving federal aid. Will the old standards apply? We just don’t know. Given the potential headaches, I’ve some sympathy for states opting not to wade in.
This all raises complex questions about what’s legal, what’s permissible, and what officials can or should do when it comes to policing these programs or the use of funds. Curious if you’ve any thoughts on that count?
Ashley: You’ve raised some very fair points, especially the longer-term risk from potential “novel regulatory and investigative powers,” as you diplomatically put it. I hadn’t thought of that angle but agree that it’s concerning.
As for oversight of funds, two thoughts. First, it is possible that the Treasury Department will opt for the Coverdell definition of a qualified educational expense. If so, tax-credit spending would be confined to private school-related items, such as tuition, uniforms, technology, and transportation. The Coverdell definition would impart indirect quality guardrails on tax-credit funds; presumably, under this definition, scholarship-granting organizations would be giving scholarships for private schools rather than for the mix-and-match approach enabled by Education Savings Accounts. This matters because private schools must be accredited and generally have higher academic achievement and civic capacities than district schools, even after controlling for family background. (We simply don’t have sufficient research on the outcomes of ESAs to compare.) There would still be variation based on state law. North Carolina, for instance, categorizes home schools as private schools. I wonder whether these constraints would induce Democratic governors who are on the fence to opt in.
But more broadly, I hope Democrats will follow Jorge’s advice with respect to educational options in general, not just the Federal Scholarship Tax Credit in particular. He has argued for Democrats to embrace an “abundance” approach to education that values innovation, accountability, and choice. He has called for more nimble, responsive systems instead of the imperium of the central office. Even before the scholarship tax credit entered the political lexicon, he wrote that by opposing choice, the political left had “neglected the most dynamic lever for equity and innovation in American education while alienating Black, Latino, and working-class families.”
Democrats could play an important role in crafting choice laws with academic results and means-testing in mind. They can’t do that if they’re not at the table.
This conversation has been edited for length and clarity.
2026-04-28 10:00:00
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