Congress on Wednesday took a major and unprecedented step toward creating a federal private school choice program, as House lawmakers narrowly approved a sweeping legislative package with $5 billion in annual tax credits that fuel scholarships and related expenses at K-12 private schools.
The federal subsidies would come in the form of dollar-for-dollar tax credits for individuals and corporations that donate to largely unregulated state-level organizations that give out scholarship funds for parents to spend on private educational options of their choosing.
Any student—even in states that have resisted expanding private school choice—from a family earning less than 300 percent of the area median gross income would be eligible to benefit from a scholarship paid for with a federally refunded donation.
Those scholarship funds could go toward private school tuition; curriculum materials; textbooks; tutoring services; fees for exams or dual-enrollment programs with colleges and universities; home-school expenses; and speech and occupational therapy services for students with disabilities.
The law says families can claim the credits equally for expenses related to private and public school students alike. It’s not clear which organizations, either existing or hypothetical, would be serving public school students and accepting donations eligible for tax-credit reimbursement.
The particulars of the private school choice piece and the broader legislation surrounding it are complex and could change. The Senate still has to deliberate and vote on the package before it gets to President Donald Trump’s desk. Democrats uniformly oppose the education provisions of the legislation, which have also drawn some criticism from some of the most fervent backers of private school choice policies that have proliferated in states over the last decade.
Even so, if the proposal moves forward, at least one core takeaway is simple, said Josh Cowen, a professor of education policy at Michigan State University and a leading critic of the private school choice movement: “Vouchers are coming to your state. If you are in favor of them, that’s a good thing. If you’re not in favor of them, it’s a bad thing.”
Here’s what else we know about the federal tax-credit scholarship proposal as it currently stands—and what it could mean if it’s signed into law in its current form.
No other federal tax credit is as generous
The Internal Revenue Service doesn’t currently supply tax credits worth the full donation amount for any cause, as the private school choice scholarship credit would do.
The federal government currently offers tax credits on donations for disaster relief, houses of worship, veterans’ assistance groups, and children’s hospitals at roughly 37 percent of the donated amount. A $10,000 donation to those causes would yield a tax credit of $3,700.
By contrast, under the proposed legislation, if a taxpayer donates $10,000 to a scholarship-granting organization, the IRS would give them a tax credit of $10,000.
An individual’s tax credit would be capped at 10 percent of the person’s adjusted gross income for that year, or at $5,000 if their adjusted gross income is less than $50,000. That means some of the nation’s wealthiest residents could claim huge swaths of the $5 billion annual allocation all on their own.
If the tax credit were in effect in 2021, for instance, Elon Musk could have received tax-credit reimbursement worth $2.9 billion, or roughly 60 percent of the annual nationwide offering, according to an analysis by the Institute on Taxation and Economic Policy, a left-leaning think tank.
Some taxpayers could even profit from the legislation as written, according to another ITEP analysis. Donors could contribute marketable securities like corporate stock, claim a tax credit worth the full value of that stock, and then avoid paying the capital gains tax they would have to pay if they had held onto the stock instead.
The major new investment would be on par with many federal programs for K-12 education
For fiscal year 2024, Congress allocated slightly more than $18 billion for Title I funding to support low-income students in public schools; $13 billion for special education; and $12 billion for Head Start providers of early childhood education.
The annual private school choice investment would fall short of those flagship education programs. But it would dramatically outpace federal funding for other K-12 priorities.
The annual private school choice investment would amount to more than five times the annual allocation for Title III funds to support the nation’s 5 million K-12 English learners; more than 10 times the annual funding for federal charter school grants; and 39 times the annual investment in McKinney-Vento grants to support the nation’s 1.4 million homeless public school students.
A $5 billion investment in private school choice would be roughly equivalent to the federal investment in the public K-12 schools of Illinois in the 2022-23 school year, the most recent one for which federal data are available. Only four states—California, Florida, New York, and Texas—got more than $5 billion apiece from the federal government for K-12 public schools that year.
The legislation as written leaves room for the program’s funding to grow. If at least 90 percent of the available credits are claimed in a given year, funding for the following year would be equivalent to 105 percent of that year’s total allocated amount.
After 2029, the limit on the amount of tax credits awarded each year would disappear entirely, without further Congressional action..
It’s not clear how states would react to the new program
In the last half-decade, a slew of Republican-led states have ramped up their investment in various forms of private school vouchers, including education savings accounts, direct tax credits, and tax-credit scholarships like the one Congress is currently considering.
Thirty states and the District of Columbia have at least one private school choice program, according to Education Week’s private school choice tracker. Of those, 17 states have at least one private school choice program for which every K-12 student in the state is eligible or will be in the coming years.
When Republicans won control of the presidency and Congress in November, some observers assumed states without private school choice already would struggle to make the case for it as federal action loomed. That didn’t pan out—Idaho, Tennessee, Texas, and Wyoming all approved major new investments in private school choice this year.
Even so, private school choice hasn’t been universally embraced, even in places where conservatives dominate politics. Lawmakers in Kansas, Mississippi, and South Dakota ultimately rejected private school choice investments they were considering this year. North Dakota’s governor even vetoed a proposal approved by both houses of the legislature, saying it didn’t do enough to enhance choice in the public school sector.
The emergence of a new federal offering could fuel efforts to rein in some state spending on private school choice, Cowen said. That’s especially true in light of Congress’ current push to cut federal Medicaid spending states rely on to cover one of the biggest line items in their operating budgets.
“The longstanding tendency for states to over time increasingly rely on federal investments to shore up what they want to do politically and then spend their own dollars on other stuff—there’s no reason to believe vouchers wouldn’t follow that exact same pattern,” Cowen said.
States like Arizona, Florida, and Ohio have already seen private school choice costs outpace projections and approach or exceed $1 billion a year. Vouchers, ESAs, or tax credits for the large share of participating students who were already attending private schools before taking advantage of state subsidies for private education represent new expenses for states.
Federal offerings would help meet surging demand for funds from existing state programs
Critics of private school choice have long argued that these programs amount to giveaways for wealthy families who can already afford private school, which often costs substantially more than the subsidies states award to families. In some states, researchers have found that new private school choice offerings lead private schools to bump up their tuition costs.
The federal offering would help some families taking advantage of state funds for private education by giving them thousands more dollars to close the gap between the costs and the government subsidies. It would also add an option for families in states like Pennsylvania and Tennessee whose applications to participate in existing state programs were rejected.
Most students currently benefiting from private school choice were already attending private school before getting state dollars to cover costs. It remains to be seen how much demand there would be for public school students to take advantage of federal voucher support in states that don’t currently have any such offerings. But it’s likely that current private school families would find the prospect of federal relief appealing.
“You’ll see campaigns that encourage kids to leave public schools and use this to attend private schools,” said Chris Lubienski, a professor of education policy at Indiana University.
Cowen predicts the 20 states that already have tax-credit scholarship programs of their own would see faster uptake for the federal tax credits than states that may not have scholarship-granting organizations already in operation and ready to give out funds.
Under the currently proposed legislation, no more than $500 million of the $5 billion in tax credits could go to residents of a single state. Taxpayers who receive a state tax credit for the same donation would have to deduct that amount from their federal tax credit.
The current approach circumvents opposition on several fronts
Because the private school choice proposal is part of a tax cut package rather than a budget bill, it needs only 51 votes to pass in the Senate—a much easier lift than convincing at least seven Democrats to join the chamber’s 53 Republicans in advancing a traditional bill.
The federal legislation also helps advocates for private school choice get around a persistent obstacle: public resistance to taxpayer investments in private schools, particularly in rural areas where public schools are widely embraced and often the only option.
Last November, voters in three states decisively rejected ballot initiatives that aimed to endorse or allow private school choice. Two of those states, Kentucky and Nebraska, are dominated by Republican voters who overwhelmingly supported Trump. In Kentucky, a majority of voters in each of its 130 counties opposed the private school choice item.
“The rhetoric for the last couple decades has been focused on inner-city minority populations that would benefit,” Lubienski said. To gather political support in rural areas, “school choice advocacy is going to have to overcome that barrier,” he said.
Private school choice proponents don’t love everything about the proposal
Billions of federal dollars going toward private school would be the biggest victory yet for the private school choice movement, which is funded in large part by far-right donors and some of the world’s wealthiest people. But the current bill hasn’t drawn universal praise from advocates for private school choice.
The House bill that passed Wednesday includes an explicit ban on participating schools discriminating against students with disabilities when deciding whom to admit.
Robert Enlow, executive director of leading school choice advocacy group EdChoice, told Chalkbeat he worries that requirement will deter participation from some private schools that value their autonomy to select students as they see fit.
A coalition of dozens of religious liberty groups, meanwhile, wrote to Congress this month urging lawmakers not to endorse private school choice. “The responsibility for religious education belongs to families, houses of worship, and other religious institutions—we do not need or want the government to be involved,” the groups wrote. Religious schools account for about two-thirds of the nation’s private schools, and there’s no prohibition in the package making its way through Congress on religious schools accepting these federally supported scholarships.
The proposal also runs counter to the conventional wisdom that conservative politicians favor “local control” and abhor federal intervention in state issues, Lubienski said. Trump and Education Secretary Linda McMahon have repeatedly emphasized “returning education to the states,” but a major new federal education initiative does the opposite, he said.
“This is the federal government coming in and imposing a will on both states and localities where they might otherwise reject this,” he said.
2025-05-22 21:39:10
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