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Commentary By Max Eden

Federal Tax Credit: Gift Horse or Trojan Horse?

Education, Education Pre K-12, Pre K-12

Donald Trump has called on Congress to pass a bipartisan school choice bill, and all signs point to a federal tuition tax credit. We’re standing at the brink of the biggest breakthrough in the history of school choice, one that could expand opportunity for millions of students. Yet one of school choice’s strongest stalwarts, the Heritage Foundation’s Lindsey Burke, stands opposed.

Several contributors to this “wonkathon” have taken issue with Burke directly or indirectly. They wonder, to paraphrase: How, when millions of students stand to benefit from choice, which she loves, can she look this gift horse in the mouth?

But Burke’s point is that if you look hard enough you’ll realize that this gift horse is actually a Trojan horse.

Now, I’d support a federal tuition tax credit in theory, but I fear Burke has a better point than her critics concede. After all, I’ve had an argument like this with her before about ESSA, and in retrospect she came off looking rather wiser. This is a wonkathon, so hopefully you’ll indulge some inside baseball because the parallels here are important.

argued that ESSA was a big step in the right direction of returning authority to the states. Burke argued that it didn’t go nearly far enough. I argued that the law contained unprecedented, specific restrictions on the Secretary of Education. Burke argued that those were just words on paper, the Secretary would do as he darn well pleased.

I thought she was being simplistic and I was being sophisticated.

Whatever else, I was wrong about that. Thanks, Obama.

Shortly after ESSA was passed, Arne Duncan mocked Congress saying “We have every ability to implement, to regulate the law…our lawyers are much smarter than many of the folks who were working on this bill.” The clever lawyers proceeded to subvert the intent of ESSA by ensuring that non-academic accountability indicators were an afterthought, by using a back-door approach to make states keep test-based teacher evaluations, and micromanaging school finance in a way explicitly prohibited by statute. (And less than six months after Congress passed a bill to limit Washington’s influence in education, ED declared it had the authority to regulate the workings of school locker rooms.)

This is why we can’t have nice (federal education) things.

And this is why, even though I think it might still be a risk worth taking, I share Burke’s reservation that it could be a Trojan horse.

What’s the worst that could happen? This:

A federal tax credit is passed later this year. Over the course of the next eight years, millions of students take advantage of a federal tax credit to attend a private Christian, Jewish, or Muslim school. But in 2025, America elects a progressive president who is hostile to school choice and is alarmed that federal taxpayer money is going to schools that teach values that conflict with the progressive catechism. The tax credit had seen its day in the Supreme Court and was held constitutional by a slim 5–4 majority amid polarizing public debate. So, the President directs his executive appointees to issue a new regulation: Tax credits won’t be granted for donations to organizations funding schools that operate in some manner contrary to the progressive understanding of constitutional rights circa 2025. Religious schools will then have to face an awful choice: Either violate the teachings they believe g-d entrusted them to convey to the next generation, or cast millions of students out of their flock.

However, there are other bad things well short of that.

Some of those things my other pro-school choice friends might like. Some things I might like, they’d think are bad. That’s the peril of a one-size-fits all national system. If there’s going to be a federal tuition tax credit, the “federal” part would have to be very strictly limited.

Is that possible? Maybe.

A bipartisan bill could potentially contain enough statutory restrictions as to make future intrusive federal regulation unlikely. But, as we learned from ESSA, we can’t count on the executive to feel bound by the letter of the law.

There may, however, be a safer approach. Even though Obama proved Burke wiser than I on the workings of Washington, the course of events has—partly—borne out my case. Trump’s election halted the school finance regulations, and if Congress overturns the accountability regulations by Congressional Review Act, ESSA will indeed have been a significant victory for a strictly limited federal role. After all, once the CRA has been invoked, the executive branch is prohibited from issuing regulations that are “substantially similar.”

Theoretically, if Congress passes a tuition tax credit bill, it’s possible that the Trump administration and the Republican Congress could enter into a savvy collusion: Congress passes a law, the Trump administration issues regulations, then Congress uses CRA to overturn those regulations and tie the hands of future administrations. Would be a long shot. (After all, the Senate might not even CRA the accountability regs.) But it could work.

However, it seems unlikely that there will be sixty votes to pass a school choice bill. More likely, a tax credit would be passed through reconciliation, where the Byrd rule could be used to limit the statute from spelling out the details.

That would give the executive carte blanch to design and regulate the federal program. That would also give any future executive the power to do whatever suits their whim. That’s a risk that might not be worth taking.

School choice advocates might not like the naysaying coming from Lindsey Burke. The Trojans didn’t like the naysaying coming from Cassandra.

But Cassandra was right. Thanks, Odysseus.

And if choice advocates don’t exercise the kind of “extreme vetting” that the Trojans didn’t bother with, Burke may too be proven right.

After all no matter how much you love big wooden horses, it’s not always wise to take them in.

This piece originally appeared at the Thomas B. Fordham Institute

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Max Eden is a senior fellow at the Manhattan Institute. Follow him on Twitter here. Frederick M. Hess is the director of education policy studies at the American Enterprise Institute.

This piece originally appeared in Thomas B. Fordham Institute