Editor's note: This post is a submission to Fordham's 2017 Wonkathon. We asked assorted education policy experts to explain how President Trump should structure his highly anticipated $20 billion school choice proposal. Other entries can be found here.
During the Presidential campaign in 2016, one of President Donald Trump’s central campaign promises was a $20 billion school-choice plan.
Now that Trump is in office, the quickest route to school choice in all fifty states is the adoption of a federal tax credit that encourages individuals and corporations to donate more money to nonprofit scholarship funds.
From a taxpayer’s perspective, under this plan, the tax savings you would receive for a donation to a scholarship fund would be greater than under current law. Currently, such a scholarship donation would be like any other charitable donation. If you are in the 35 percent tax bracket, you would receive 35 cents back for every dollar donated. Once this is turned into a scholarship tax credit, instead of a simple deduction, you would receive $1 back for every $1 donated.
This simple change is like putting charitable donations for scholarship funds on steroids. A lot more people would donate, and thus a lot more money would be raised for K–12 scholarships.
With a lot more raised for K–12 scholarships, literally millions of additional students would be able to choose to attend private schools, if they wanted. Some people would choose private schooling for religious reasons. Others for quality reasons. Some for a focus on virtue and character development. Others to escape the obsessive testing in public schools. Still others, especially in urban areas, because they simply think their local public school is too dangerous. That’s what choice is all about—parents and children sorting out what is most important to them, and which educational option best meets their needs.
Not any scholarship tax credit will do. The tax credit has to have certain features to be worth pursuing.
First, the tax credit should apply to all fifty states. The federal tax code is universal, and so should be a scholarship tax credit. Some on the Right would have the tax credit only operate in some states, not others. Any opt-in feature would limit the tax credit to red states and leave out millions of students who need choice in blue and purple states. This would be a huge mistake.
Second, the language of the tax credit legislation needs to allow schools where the scholarships are redeemed to retain their autonomy. The fact that these schools are not like public schools is exactly why parents seek out private options. This means, in practical terms, the legislation cannot include any provisions that impose federal requirements for standards, curricula, or teaching methods. It also means that no language should be included that impairs the religious freedom of parents, religious institutions, or religious schools.
Third, tax-credited scholarships should be allowed for children from low-income, working-class, and middle-income families. The existing child tax credit is fully available for up to $110,000 in family income for married couples filing jointly, with a gradual phase-out above that level. Perhaps a similar approach could be applied to scholarship eligibility.
Low-income families are not the only ones struggling to afford the choice of a quality school for their child. Many middle-class families face flat wages, unimaginable college bills, and, in many urban areas of the nation, a high cost of living. They need help, too.
Fourth, a broad array of nonprofit scholarship providers should be allowed. It would be a mistake to create government-controlled scholarship organizations. The IRS already allows a tax deduction for donations to scholarship organizations. There is no need to introduce a new layer of federal regulation or control over scholarship organizations. The federal government should not be allowed to pick and choose specific scholarship organizations to participate.
From a legal perspective, the scholarship tax credit is unassailable. The U.S. Supreme Court decisions in Zelman v. Simmons-Harris (2002) and Arizona Christian School Tuition Organization v. Winn (2011) have shut the door to any federal constitutional challenges. Plus, as a federal initiative, the state-level anti-Catholic Blaine Amendments (present in thirty-seven states) would not apply.
Even with these sensible features, a scholarship tax credit will be opposed by teachers unions who oppose any alternatives to the unionized public schools—no matter how many public schools are low performing or unsafe. Their opposition is knee-jerk and self-interested.
For philosophical reasons, the scholarship tax credit also is opposed by some on the Right. They oppose any federal education initiative whatsoever. For example, Lindsey Burke of the Heritage Foundation argues: “The federal tax code is not the appropriate lever for establishing a tuition tax credit scholarship program because, unlike at the state level, where states have a state constitutional mandate to provide each child with an education, the federal Constitution has no such provision.”
Yet, what Burke ignores is the federal tax code already allows a charitable deduction for donations to K–12 scholarship funds. And Heritage actually strongly supports the federal charitable deduction. In a Heritage paper defending the charitable deduction during the Obama years, Heritage explained that the charitable deduction “not only provides an incentive to give to organizations that serve the needy, but also allows citizens to control more of their own money, enabling them, if they wish, to donate more to charity.” Well said.
A scholarship tax credit would simply build on the existing charitable tax deduction, which enjoys broad popular support, and increase the tax incentive for those charitable donations that fund scholarships at the K–12 level.
Why is a charitable tax deduction perfectly fine but a charitable tax credit suddenly the end of the world? The honest answer is the change in the percentage of the tax incentive for donations to scholarship funds does not introduce a new federal role.
So let’s figure out how best to bring meaningful school choice to as many families as possible. The scholarship tax credit is the best mechanism for President Trump to fulfill his campaign promise and provide school choice in all fifty states.
The scholarship tax credit should be included in the federal tax-reform bill slated to be voted upon later this year. This bill likely will be approved through the reconciliation process, which only requires fifty-one votes in the Senate and is exempt from a filibuster. Given the 100 percent Democratic opposition to the confirmation of Betsy DeVos as U.S. Secretary of Education—at the request of the national teachers unions—one could reasonably predict that any school choice measure will need to be adopted with Republican votes alone, at least in the Senate.
Democratic opposition to a scholarship tax credit may not be without consequences. With scholarships going out to families in blue and purple states and reaching economically disadvantaged families, blue-collar households, and even the children of union workers, Democratic elected officials will have to ponder whether their fealty to the two national teachers unions has put them at odds with their electoral base.
In past elections, much attention was given to soccer moms. In the future, Democrats may learn to fear also a rising tide of scholarship moms.
Thomas W. Carroll is president of the Invest in Education Coalition based in New York.
The views expressed herein represent the opinions of the author and not necessarily the Thomas B. Fordham Institute.