School Choice & Charters

Does the Tax Bill Help Fulfill Trump’s $20 Billion School Choice Promise?

By Arianna Prothero — December 20, 2017 4 min read
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Expanding college savings accounts to include tuition at private K-12 schools—part of the tax bill now-approved by Congress—is the most significant policy victory school choice advocates have notched at the federal level since President Trump took office.

Trump had campaigned on expanding school choice spending by an eye-popping $20 billion. But he and the GOP-controlled Congress have so far failed to deliver on that.

But not all school choice supporters are on board with the idea of allowing families to put aside $10,000 annually in the tax-advantaged 529 savings accounts for private school tuition—including some at prominent conservative and libertarian think tanks.

Among them is Neal McCluskey, an education analyst at the CATO Institute.

Equity and Government Overreach

One issue that someone in the school choice community is guaranteed to raise any time a federal school choice program is proposed is that of government overreach.

Federal programs inevitably come with federal rules—if not at the program’s inception, they will likely be layered on over time, McCluskey said. And choice advocates don’t want to see private schools regulated into carbon copies of traditional public schools.

“The 529 plan at the very least begins to put the camel’s nose under the tent,” said McCluskey. “Maybe someone uses 529 earnings to go to a school that ends up going out of business or all the kids fail math. It’s not hard to imagine someone in Congress saying, well, we’ve seen 529 money misused, so now we have to put regulations on that.”

McCluskey is also concerned that 529s will only serve upper-income families—another common criticism of the expansion provision.

Meanwhile, Nat Malkus, the deputy director of education policy at the American Enterprise Institute, fears private schools will benefit at the expense of low-income students. States stand to lose tax revenue from 529 holders deducting their savings from their state taxes, which could translate into less state money for low-income students in public schools. (Read the full explanation of Malkus’ theory on the Politics K12 blog.)

Homeschoolers Left Out Again

The tax bill was poised to be a boon for homeschoolers, who would have been allowed to use 529 savings on homeschooling expenses. But that was stripped from the bill at the last minute after it was discovered that including homeschooling expenses violated Senate rules for the bill—an issue raised by Sens. Bernie Sanders, I-Vt., and Ron Wyden, D-Ore.

That move was a blow to William Estrada, the director of federal relations for the Home School Legal Defense Association, a conservative advocacy and lobbying group that has worked for well over a decade to expand 529s to include home schooling supplies.

Estrada said this underscored a larger issue: The Democratic Party continues to be hostile to homeschoolers, even as the demographics of the nation’s 1.7 million homeschoolers are changing.

“It’s not just religious conservative families,” Estrada said. “You have LGBT families, that’s a very fast-growing trend of families who are choosing to home school. ... Home schooling looks very different today than it did 30 years ago.”

What Happens Next with Trump’s School Choice Agenda?

Some school choice advocates are thrilled with the 529 expansion. One is James Cultrara, the co-chairman of the New York State Coalition for Independent and Religious Schools.

He sees it as a noteworthy effort toward fulfilling Trump’s campaign promise to greatly expand school choice.

“I think it’s the most important step that’s been taken on a national level in probably the last 20 years,” said Cultrara, who is also the director for education at the New York State Catholic Conference.

“We haven’t seen from Congress any nationwide initiative that can benefit this many families in every state. It’s not only notable, it’s a great achievement.”

Cultrara said his group is now looking into ways to leverage the 529 plans so low-income families can also take advantage of them. Specifically, he said, they would look into whether donors can contribute to a 529 account on behalf of a low-income student.

Now that Congress has expanded 529s to include K-12 expenses for private schools, school choice advocates are hoping other items on their wish lists may get fulfilled under Trump’s watch. Among them: a national tax-credit scholarship program and an education savings account program for military families.

Related stories:

Photo: President Donald Trump congratulates Senate Majority Leader Mitch McConnell of Ky., while House Speaker Paul Ryan of Wis., watches in background, during an event held on the South Lawn of the White House on Dec. 20 to celebrate final passage of tax overhaul legislation by the Republican-led U.S. Congress. —Manuel Balce Ceneta/AP

A version of this news article first appeared in the Charters & Choice blog.