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Two Possible Paths for a Tax-Credit School Choice Plan in Congress

By Andrew Ujifusa — March 02, 2017 5 min read
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Of the various school choice bills that might enter the arena in Congress, creating tax credits to fund private school choice might be the most logical, and it’s one of the options the Trump administration is considering.

There’s already a recent blueprint for such tax credits in the form of a 2015 bill, the Educational Opportunities Act, written by Rep. Todd Rokita, R-Ind, and Sen. Marco Rubio, R-Fla. And in his address to Congress Feb. 28, President Donald Trump specifically urged lawmakers to take up school choice legislation to help disadvantaged children, which could impact the policy specifics of any tax-credit bill.

But here’s a major X-factor for creating federally backed tax-credit scholarships: Congress probably wouldn’t use the House and Senate education committees to advance any tax-credit scholarship plan, according to two people we talked to. And it likely wouldn’t be proposed in a standalone bill. There are probably two feasible paths for Washington to create a federally backed tax-credit program.

Tax Reform

A tax-credit school choice plan could be part of a major tax-reform plan, according to Christopher Cross, a former assistant secretary at the U.S. Department of Education and Republican staffer in Congress who now runs an education consulting firm. That means the House Ways and Means and Senate Finance committees would be the ones dealing with education tax credits as part of any tax-reform plan, which the Trump administration and other conservatives have been discussing publicly for some time.

One major consequence of the different congressional route for a tax-credit plan is that those two committees are relatively unfamiliar territory for many (but not necessarily all) of professional education associations that might oppose or support tax credits. And for opponents of education tax credits in particular, it would probably be harder, Cross said, to get lawmakers on the relevant House and Senate committees worked up about a single tax credit in a larger tax-reform plan.

“They’ll be paying attention to the business tax rate, to the individual rate changes, to what’s going to happen to charitable deductions,” Cross said. “There’s a host of issues that will, frankly, eclipse an education tax credit for most members and the public and the media.”

Cross also said lobbyists representing big business and other groups who are more familiar with lawmakers on the Ways and Means and Finance committees might, if anything, look favorably on a tax-credit plan for education, even if they’re more focused on other issues.

The chairman of the Senate Finance Committee is Sen. Orrin Hatch, R-Utah, who also happens to serve on the Senate education committee. Hatch did not cosponsor the Rokita-Rubio bill, but he did vote in favor of a voucher amendment to ESSA. Other GOP Senate education committee members who are also on the Senate Finance Committee are Sens. Richard Burr of North Carolina; Bill Cassidy of Louisiana; Michael Enzi of Wyoming; Johnny Isakson of Georgia; Pat Roberts of Kansas; and Tim Scott of South Carolina. The top Democrat on the Finance committee is Sen. Ron Wyden of Oregon; the two Democratic senators who serve on both relevant committees are Sen. Michael Bennet of Colorado and Sen. Bob Casey of Pennsylvania.

The chairman of the House Ways and Means Committee is Rep. Kevin Brady, R-Texas, and the top Democat is Rep. Richard Neal of Massachusetts. Brady gave a speech at the CPAC conference last month about tax reform, but made no mention of education tax credits.

So could lawmakers just take the Rokita-Rubio tax-credit bill and incorporate it into a big tax-reform plan? It’s possible. The American Federation for Children, the school choice group formerly led by U.S. Secretary of Education Betsy DeVos, is a fan of that bill. But such a move, according to Cross, would be missing an important piece because, “It doesn’t deal with the egos. It’s hard to take something else and not have your fingerprints on it.”

Budget Reconciliation

The other possible path is through budget reconciliation. That’s an inside-baseball process in Washington to allow for lawmakers to consider and pass a budget bill through simple majority votes.

Here’s the thing about any tax credit that’s created through budget reconciliation: It would consist of just a few lines, not pages of text like in a traditional bill. Any such limited language would have to include giving the Treasury Department authority over the program, and perhaps a few other general provisions. But a host of other details, such as any civil rights protections, might not be spelled out.

“It’s not going to be a full-blown policy proposal [within a budget reconciliation],” said Lindsay Fryer, a vice president at the Penn Hill Group lobbying firm and former education staffer for Sen. Lamar Alexander, R-Tenn., the chairman of the Senate education comittee.

It’s also unclear if the language could require the Education Department to work with the Treasury Department due to the rules of reconciliation, Fryer also said.

Here are some other considerations for lawmakers in any tax-credit scholarship proposal:


  • One of the biggest question marks is what role states would have in authorizing or overseeing scholarship-granting organizations, which typically are responsible for receiving the donations and using them to fund scholarships in states. Would states authorize their own organizations that could be eligible for donations under the federal tax credits? Or would federal agencies, like the IRS and the Education Department, spell out requirements for such groups, such as annual reports and limits on administrative expenses?
  • More broadly, would states have to formally “opt in” somehow in order for these federal tax credits to impact their students’ private school options? (The Rokita bill appears to allow scholarship groups to form without states explicitly opting in.)
  • Would any proposal involve tax credits, or could deductions instead be the vehicle to drive dollars towards school choice?
  • Assuming that tax credits are the vehicle: What would be the cap on total federal tax credits made available? And what would be the maximum credits available to individuals and corporations?
  • Would tax credits be available for donations to non-profit local foundations for public schools? Or would they only apply to scholarships for private schools? This would be an interesting debate to watch between Democrats and Republicans.
  • For that matter, would the tax credits only apply to scholarships? Or could donations against which the tax credits are claims be made for books, fees, transportation, and other expenses?
  • Would there be income limits on those who could take advantage of the donations made under a federal tax-credit program? The Rokita-Rubio bill from 2015 limited eligibility to students from households making up to 250 percent of the federal poverty line. The federal poverty threshold for a family of four is $24,600, making 250 percent of that limit $61,500.

Photo: The U.S. Capitol (Susan Walsh/AP)


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