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Commentary By Max Eden

The Pitfalls, and Promise, of a Federal Tuition Tax Credit

Education Pre K-12

Donald Trump promised a $20 billion federal investment in school choice. He also promised to respect state and local authority over K-12 education.

The inescapable tension between those two promises is why school choice stalwarts are already coming out against a federal choice initiative. The central intuition behind school choice is that parents ought to have as much power as possible. Any federal program is almost certain to put the policy preferences of distant federal bureaucrats over states, civic organizations and parents.

Almost. To his credit, Trump seems to be eyeing the one approach that could avoid that trap.

In his address to Congress, Trump highlighted Denisha Merriweather, a young woman whose life was fundamentally changed by a state tax credit scholarship. This perhaps tipped Trump's hand on the nature of his proposal: a federal tax credit for individual and corporate donations to scholarship granting organizations.

If we assume that his administration caps the tax credit at $20 billion, this proposal could perhaps give millions of students the transformative opportunity Denisha had. But whether a tuition tax credit can reach its full potential, expanding opportunities for families without inadvertently tying their hands and the hands of state legislatures, depends entirely on how it's written.

Last Congress, Senator Marco Rubio and Congressman Todd Rokita introduced a tax credit bill that Betsy DeVos, now secretary of education, declared would, "empower parents throughout the country to have access to quality education options that are otherwise out of reach." While that bill was a good start, it also contained three key flaws in the near term, would limit its potential and, in the long term, could harm the cause of school choice.

Fortunately, DeVos need not merely dust off someone else's proposal and peddle it. She could make the idea her own by fixing its flaws and delivering a win for tens of millions of families for decades to come.

The first problem with the Rubio-Rokita bill is that it prohibits scholarship-granting organizations from setting aside contributions "on behalf of any particular student or to any specific school or group of schools." If you believe in the creative power of a Montessori education, in the timeless value of Catholic schools, or are a Big Brother mentor hoping to go above and beyond for your mentee, then this tuition tax credit is not for you. This restriction would not only limit donor interest to well under $20 billion a year, it would also exert pressure on existing state programs to drop their moral mission and conform. But there's an easy fix: just delete that clause.

The second problem is that scholarship granting organizations may only donate to traditional private schools. In the last five years, Education Savings Accounts programs (ESAs), a debit-card-esque account that parents can use on a wider range of educational options, have exploded in popularity; programs have been launched in five states and will be debated in over a dozen state legislatures this year.

ESAs take school choice to the next level, letting parents customize their child's education and potentially unleashing a wave of innovative educational options. By restricting choice in the federal program to traditional private schools, the Trump administration would not only miss a huge opportunity. It would knock the ESA debate off the rails, focusing state legislative attention on supplementing the more limited federal tax credit program.

It would take some effort to fix this flaw, but the reward would be well worth it. Congress could empower scholarship-granting organizations to act as ESA administrators, expanding the range of options available to parents and monitoring their spending. This model already exists in Florida, where Step Up For Students runs the Gardiner Special Needs Scholarship, allowing parents to customize their child's education so long as they meet Step Up's requirements. Similar civic institutions can and should flourish across the country, being held accountable to the taxpayers at the state or federal level.

The third issue is perhaps the most important and difficult to address: establishing firm guard rails against future intrusive federal regulation. Under the Obama administration, the Department of Justice investigated schools in the Milwaukee Parental Choice Program for not adhering to federal regulations under Title II of the Americans with Disabilities Act. The thing is, both legal state and court precedent said that those regulations didn't apply to them. Any federal revenue stream opens up private schools to the depredations of future administrations who'd prioritize hostility to school choice over rule of law.

But an even bigger issue is the fear from religious schools that federal school choice funding would be a Trojan Horse. Christian, Jewish and Muslim schools assume a tragic risk if they choose to take federal funding. Someday a progressive president may present them with an ultimatum: either violate their teachings and their conscience or forfeit federal funds and cast out hundreds of thousands of poor students. Religious schools may not be wrong to feel that no matter how strong the statutory language, a future administration might do this anyway. But the Trump administration must make a good-faith effort.

If they take the time and care to get the details just right, it's possible for DeVos and Trump's team to launch a federal school choice initiative that encourages innovation and opportunity. But if they merely promote someone else's proposal to score points on a campaign promise, they'd ultimately set school choice back significantly. Here's hoping they choose their course on school choice carefully.

This piece originally appeared in the Washington Examiner


Max Eden is a senior fellow at the Manhattan Institute. Follow him on Twitter here.

This piece originally appeared in Washington Examiner