The federal government unveiled details last week for a new initiative that many are calling a national school choice program.
The Federal Scholarship Tax Credit, also known as the Education Freedom Tax Credit, offers a 100% tax nonrefundable credit for donations up to $1,700 dollars per individual or $3,400 for a couple filing jointly, towards scholarships that can be used for a broad range of educational purposes, including private school tuition, tutoring, books and supplies.
“Education freedom is the key to unlocking opportunity and success for our next generation of students,” said U.S. Secretary of Education Linda McMahon in a statement. “The Education Freedom Tax Credit, the largest expansion of school choice in history, will supercharge those opportunities for millions of children.”
Individual states have to opt in to the program, and so far, Colorado is the only consistently progressive state that has done so. Gov. Jared Polis registered the state with the federal government for the program last January.
“Encouraging donations through federal tax credits will encourage Coloradans to give to charitable organizations and support public education here in Colorado, putting millions of more dollars towards kids learning through scholarships, tutoring, after-school support, and more,” Polis said in a statement.
The tax credit will be available for people who donate to Scholarship Granting Organizations, or SGOs, which the federal government describes as nonprofits that can accept contributions for scholarships to students for “education-related services.”
All school-aged students from families whose household income is within 300% of the area median income are eligible, a threshold that would include about 95% of the nation’s children. Donors are not permitted to earmark funds for a particular student.
But critics call it a scheme to starve public education in favor of private schools.
“Their purpose is to provide scholarships for students to attend private schools,” said Eric Duncan, director of K-12 policy with EdTrust, a progressive education advocacy group. “This is really to drive students from public schools into private schools.”
The draft rules do allow Scholarship Tax Credit money to support public school students, with expenses such as tutoring and before- and after-school programs.
Another concern, Duncan said, is that under the Treasury Department’s new rules, the SGOs would have too much leeway to determine how and to whom they distribute those scholarships, which are tax exempt for the recipients. SGOs are responsible for determining how and to whom scholarships are given, and how that funding is prioritized, according to a recent policy brief from the Colorado Fiscal Institute.
“SGOs, not states, decide who receives scholarships and how funds are distributed, even though the program is supported through federal tax credits subsidized by taxpayers,” the brief read. “The public helps pay for the program, but private organizations receive full decision-making power over where the money goes.”
“The way that the regulations are drawn, pretty much any student is eligible,” he said. “It isn’t targeting the most vulnerable students.”
The rules prevent individual states from establishing their own standards for locally operating SGOs and the scholarships they offer, so Colorado would not be able to require them to, say, target low-income or vulnerable kids.
In a statement, Gov. Polis said he was planning to comment on the draft rules released last week.
The Trump administration expects more than 11 million taxpayers could contribute $26 billion each year, and up to 5 million students nationwide will receive money from the program, which launches in January.
