Trump's big bill includes an ‘unprecedented' tax credit for a national school voucher program. Here's how it would work

Yahoo

06-06-2025

Part of the massive domestic policy bill currently moving through Congress known as the 'Big Beautiful Bill,' includes an unprecedented $5 billion national school voucher program. Republicans have long advocated for so-called school choice, but critics have labeled the initiative a tax cut for the wealthy.
Sending public dollars to private schools has long been the subject of partisan divide and controversy. It has many powerful advocates, most notably former Education Secretary Betsy DeVos, who served under Trump during his first term. And it has fierce critics, particularly on the left.
But congressional Republicans' proposal, known as the Educational Choice for Children Act (ECCA), goes beyond any previous efforts, not just by creating the first nationwide program but also by creating an unusual federal tax credit for anyone wanting to donate toward the cause.
Families making up to 300% of area median income would be able to apply for, and receive, scholarships to use toward private school tuition, homeschooling books or tutoring, for example. The money would be given out by third-party scholarship granting organizations (SGOs) certified by the US Treasury and IRS.
Donors would be the ones to reap the tax benefits, though. Anyone across the country – with or without kids – would be able to donate to one of these SGOs as they would to any charity.
But unlike donating to a church or food bank, where tax-deductible contributions help lower total taxable income, SGO donations would result in a full tax credit, dollar for dollar, up to the greater of $5,000 or 10% of one's income. For example, $1,000 donated to an SGO would result in $1,000 taken off one's tax bill.
Advocates say these incentives would strongly encourage taxpayers to contribute and that the opportunities could change the lives of kids stuck in failing public schools.
'We have what might be a once-in-a-generation opportunity this year to capitalize on what has been a real movement at the state level for school choice by creating a pathway to supercharge school choice in every state in our nation through a school choice tax credit,' wrote Tommy Schultz, CEO of American Federation for Children, in an email to CNN.
Carl Davis, research director at the Institute on Taxation and Economic Policy, says the program is generous – to say the least. 'A dollar-for-dollar charitable donation tax credit is unprecedented at the federal level,' he told CNN in an email.
Furthermore, House Ways and Means committee staff verified to CNN that stocks would be accepted as donations in this proposal. Donors would receive a tax credit for the value of those stocks, without having to pay capital gains taxes that would have been required had the stock been sold instead.
'This is unbelievable,' said Sasha Pudelski, director of advocacy for AASA, The School Superintendents Association. 'It's weaponizing the tax code to code to destroy our public schools.'
But Schultz said, 'These concerns are not in good faith unless those raising them have also been calling to overhaul 501c3 giving overall.'
On the state level, there are similar existing tax credits for donors contributing to state school voucher programs. An ITEP study showed that for three states providing data, Arizona, Louisiana and Virginia, more than half of all voucher tax credits are flowing to families with annual incomes over $200,000.
The House narrowly passed the bill, and it is now in the hands of the Senate, where its future is uncertain. If passed, the ECCA would go into effect after December 31 and would cap annual tax credits to $5 billion, with the option of increasing the cap by 5% each year. The program would sunset at the end of 2029, unless Congress renews it.
Families do need more educational choices, said Robin Lake, director of the Center on Reinventing Public Education (CRPE), a nonpartisan research organization affiliated with Arizona State University.
Of the various studies on school choice CRPE has done in the last 30 years, Lake said results can be mixed. She said study evidence is weak that vouchers result in better academic achievement for participating students. But Lake said there are more positive outcomes when looking at graduation rates and parent satisfaction – when school choice is done right.
Lake described the pillars that make school choice most effective, which don't happen overnight: a supply of high-quality schools, incentives and startup funds for great school proposals, a pipeline to develop great educators, and accountability.
'Folks in the private school world can bristle at the idea of regulation, but in order for families to really take advantage of choice programs, they need to have some kind of information about how the schools are working,' she said. 'And I would argue that if public funds are going to support these schools, there's also a responsibility for some public accountability as well.'
Accountability has become crucial, with recent investigations like one in Florida by WESH-TV, showing that 8,400 students had received reimbursements for theme park tickets through the state-funded vouchers.
'Critics are quick to point to examples of isolated waste being caught and addressed but are more hesitant to discuss the massive scope of fraud and waste documented and often unaddressed in the public education system – or the fact that public schools caught up in this type of waste often just keep getting more taxpayer dollars,' Schultz said.
As written, the ECCA leaves accountability to the SGOs, who would verify and grant the use of scholarship dollars. SGOs would have to be certified by the US Treasury and IRS and would be subject to independent audit.
'Nothing is ever clean, right?' said Bridgette Garcia, a mother of four children who all graduated from St. Genevieve Parish Schools in the Los Angeles area. 'None of these different tax programs or programs within the government are (on the) up and up. But if somebody can actually benefit,' she said she would love to see that happen for families like hers, where she and her husband worked multiple jobs to afford tuition.
Garcia's youngest child just graduated from St. Genevieve this June. She jokes that with tuition payments all done, her family can finally get a new car after driving the same 2007 Mercury and 2005 Torres for about 20 years.
She wanted her children to have a Catholic education, 'where it's ok to say I believe in God and pray at the beginning of the day.' She was also concerned about the safety of their local public schools.
Next year's tuition for St. Genevieve high school students is $13,475; elementary school tuition will be $7,550, prices Garcia says she couldn't afford if she didn't have scholarships provided by the school.
But parents who are invested in their local public schools see this voucher program as a threat.
'It is sort of an abandonment of public schools,' said Maria Clark, whose two daughters are part of Daviess County Public Schools in Kentucky.
Clark, who is on the board for the district foundation, said these vouchers would only exacerbate educational disparities, allowing some students to leave the public system while others may not be able to. Many private schools do not have resources to accommodate special needs students or may require certain testing or grades to be able to enroll. Some public school students, including those who are lower income – without transportation, for example - cannot simply switch to a private school if given a voucher.
To those who say parents should be granted resources to put their children in better-performing private schools, Clark says, 'My argument is we can make all of those (good) things happen at public schools, and we should, because we already have money in public schools.'
She worries that public schools will lose per-pupil funding as kids leave, even as parents like her already donate buckets of classroom tissues and pencils at the start of every school year.
'We have struggled to find bus drivers,' Clark said. 'Last year… we had busses doing two runs, and some of those kids would get to school an hour and a half, two hours late.'
But Schultz, the school choice advocate, said that 'funneling more dollars into public schools in America does not equal improvement or make public schools the right fit for every kid.'
The proposed ECCA would allow families making as much as 300% of area median income to receive scholarships.
For Daviess County, that means a family of four making under $195,969 per year could still be eligible to receive scholarships for private school, using the US Census Bureau's estimates for 2019-2023. For Los Angeles County, a four-person household making under $263,280 would still be eligible.
In the wealthiest county in the US, Loudoun County, Virginia, a family of four making under $536,121 could be eligible to receive scholarships for their children.
The ECCA does not limit how much an SGO can give a family in scholarships.
In some Democratic-leaning states like California, voters have already rejected the idea of voucher programs. If a nationwide program were to exist, it would be the first opportunity for parents in states like California to use vouchers to send children to private schools.
The ECCA's donation process also benefits donors. Typically, someone who donates to a food bank or pet rescue would receive no more than 35 cents in tax savings for each dollar donated, according to ITEP. But someone who donates to private voucher groups would receive a full reimbursement for the donation, dollar for dollar. And stock donations could open up a way for wealthy donors to avoid paying capital gains taxes.
ITEP estimates the bill would reduce federal tax revenue by $23.2 billion and state income taxes by $459 million over the next 10 years as currently drafted.
'There's a danger that politicians will increasingly pick and choose which kinds of donations get the best tax breaks and if your values don't align with theirs, well then you're out of luck,' ITEP's Davis wrote to CNN.
Public school systems may also lose money, depending on how many students leave the district.
Dr. Darin Brawley, superintendent of Compton Unified School District, said his district has already seen a 4% annual decline in enrollment as people leave the state, shrinking his budget by about $8 million per year.
'From the initial look at our enrollment trends for next year, we're already significantly behind,' Brawley said.
If more students leave, Brawley worries about an 8% decline, which would result in the loss of $21.12 million and therefore layoffs, hiring freezes and bigger class sizes.