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Critics of Private School Choice to Push Tax-Focused Bill in Congress

By Andrew Ujifusa — July 27, 2017 | Updated: June 08, 2023 3 min read
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Updated: A previous version of this page included an embedded PDF, which has since been removed.

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We’re still waiting to see if Republicans will back a federal tax credit for donations supporting private school scholarships. But critics of private school choice are trying to seize the initiative in Washington.

The Public Dollars for Public Schools Act, slated to be introduced soon by Rep. Terri Sewell, D-Ala., would not allow those who claim tax benefits for donations to state scholarship-granting organizations to mark those down as charitable donations on their federal tax returns.

“We want to address the concern that some people are getting a double tax [benefit] for their donations,” said Christopher MacKenzie, a spokesman for Sewell.

What does that mean? Supporters of the legislation argue that those who donate to scholarship-granting groups can, when they combine state and federal tax benefits, actually “turn a profit” on their donations that are supposed to be charitable contributions. They also say tax-credit scholarship programs in states like Alabama and Georgia sometimes advertise this ability to “double dip” to potential donors.

Sasha Pudelski, an assistant director at AASA, the School Superintendents Association, said the bill would “force Congress to clean up the tax code to keep wealthy Americans from having a tax shelter that enriches them and diverts resources from public schools.” She added that she hopes this element of the bill might garner at least a bit of love from GOP lawmakers, even though at the same time the bill would at least indirectly undercut one element of support for school choice.

“It’s not sound fiscal policy at all,” Pudelski said.

The state Sewell represents, Alabama, has a tax-credit scholarship program, and MacKenzie said the congresswoman is troubled by the extracurricular programs at public schools that no longer have financial support while the state’s scholarship system directs money to private schools. Thanks to this dynamic, in Sewell’s view, Selma High School, where she graduated, “has now become resegregated.”

The legislation itself doesn’t stand a great chance of passing the Republican-controlled Congress. But it might set down a marker in negotiations over any changes to federal taxes, a top priority for GOP leadership. Sewell’s office doesn’t yet have numbers detailing the impact on federal tax revenue of the current set-up—it’s waiting on answers from the Joint Committee on Taxation in Congress for that information.

“Congresswoman Sewell is a strong supporter of the charitable deduction, which many of her modest-income constituents take advantage of for contributions to their churches and local charities,” Mackenzie said. “This private school voucher tax scheme privileges voucher nonprofits over churches, food banks, and so many other worthy charities.”

Supporters of tax-credit scholarships have pushed back against this argument about lost tax revenues.

For example, the Foundation for Excellence in Education, an advocacy group founded by former Florida Gov. Jeb Bush, highlighted findings from a study that the Sunshine State’s tax-credit program saves taxpayers $1.49 for every dollar lost in business income tax. “Independent evaluations of the Florida tax-credit program have shown positive results for students and taxpayers,” the foundation said.

More broadly, school choice advocates have tried to counter the idea that school choice promotes racial segregation.

Tuition tax credits have been talked about for some time as a way for President Donald Trump to expand school choice. And the attention focused on them might increase if the Trump budget’s proposals to expand choice fall flat in Congress. In February, Rep. Todd Rokita, R-Ind., reintroduced 2015 legislation to allow for a federal tuition tax credit. U.S. Secretary of Education Betsy DeVos also backed such tax credits during her time as the head of American Federation for Children, a school choice advocacy group.

There’s a good chance the Treasury Department and not the Education Department would likely control oversight of any tuition tax credit, if it gets the nod from lawmakers.

However, so far the Trump administration has not expressed any public interest in or pitched a specific tax-credit program. Nor has the group of GOP lawmakers working on comprehensive tax reform. A statement on tax reform from GOP leaders released Thursday doesn’t mention K-12 choice.

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