A historic change is underway in American education with many states passing broad school choice programs. Roughly one-in-three American students will soon have the ability to attend a school of their parents’ choice or access an education savings account to customize their education. According to Ed Choice, seven states created new programs and eight states expanded existing programs so far this year. Roughly 18 million children will soon be able to access private education choice programs.
While state lawmakers are leading the way in expanding equal opportunity in K-12 education, Congress can update federal education programs and tax laws to give children better opportunities to learn. Federal reforms may be unlikely in the 118th Congress, but the 2024 campaign will bring new attention to ways that Washington can help parents. The historic learning losses revealed by the National Assessment of Educational Progress and 2022-23 state exams should motivate lawmakers and national leaders to provide disadvantaged children better education options.
Federal policymakers have several options for expanding K-12 parental choice.
First, the Senate’s Health, Education, Labor and Pensions and House Education and Workforce committees should develop legislation to reform the Every Student Succeeds Act (ESSA) and the Individuals with Disabilities in Education Act (IDEA) to provide better opportunities for economically disadvantaged and special education students.
In the past, lawmakers have attempted to reform federal education programs to expand parental choice, including by allowing Title I funds (which are currently provided to school systems that educate a high-number of low-income families) to follow low-income children to a school of their parents’ choice or to use some of the funds to access “supplemental educational services” or tutoring. Teachers’ unions have strongly opposed these reforms, because they want to maintain control of public education funding. To date, their opposition has prevailed. But following the pandemic and the disappointing use of $190 billion in emergency education funding, lawmakers should make a strong argument that federal funding should go directly to help disadvantaged children, including to access tutoring or new school options. Similarly, IDEA should be reformed to allow states that have enacted new ESA or similar choice programs to use federal funding to help parents access these new options.
In addition, the executive branch can use flexibility in existing laws to leverage federal funding programs to give states greater flexibility to enhance choice. For example, the Trump Administration used executive authority to allow states to use the Health and Human Services (HHS) Child Care and Development Fund “to subsidize child care services and services that supplement academic instruction for children under the age of 13.” In December 2020, the Trump administration also ordered HHS to make Community Service Block Grant program funds available for emergency learning scholarships to disadvantaged families. As Dan Soifer and I wrote last year, the Treasury Department also should clarify that the employer-provided child care tax credit can be used to provide instruction as well as child care services to expand the supply of new schools.
Second, Congress should consider how the tax code could be used to facilitate parental choice. In past tax reforms, including 2001 and 2017, lawmakers expanded the use of education savings accounts and 529 accounts to pay for K-12 private education. While Americans with the financial means to save and pay for their children’s education benefited from this added flexibility, these valuable reforms did little to help those living on the bottom half of the income spectrum, since many parents can’t afford to save for education.
Fortunately, some lawmakers have proposed tax reforms that would provide new education options to disadvantaged children. The Education Choice for Children Act, legislation introduced in the House (H.R. 531) and Senate (S.120), would make $10 billion in tax credits available to taxpayers to contribute to organizations that award scholarships for private school tuition and tutoring. To receive this support, children must be living in households with incomes below 300 percent of the poverty line. Tax credits would be awarded on a first-come, first-serve basis–with base amounts ensured for each state–to spread the new scholarships across the country. The legislation has 108 cosponsors in the House and 27 cosponsors in the Senate.
Offering parents and taxpayers benefits that provide flexibility to choose new schools or contribute to scholarship funds would improve American education by expanding choice and opportunity. The $10 billion in new scholarship funds in the Education Choice for Children Act would be enough to fund approximately $10,000 scholarships for a million children and would expand opportunity.
Congressional lawmakers developing potential tax reforms to expand parental choice in education should also consider other ideas that may be more feasible for the Treasury Department and states to implement. Scholarship tax credit programs require significant administrative work by the private sector or scholarship granting organizations. The proposed federal credit may be difficult for the Treasury Department to manage, since it would require the implementation of what is likely a first of its kind “first-come, first-serve” tax benefit.
Another tax reform option would be to provide full or partial tax credits to low- and middle-income parents to make contributions into 529 accounts, which under federal law allow tax-free savings for education expenses including K-12 tuition. For example, in 2022, Senator Maggie Hassan (D., N.H.) and Senator Susan Collins (R., Maine) introduced the Helping Parents Save for College Act, which would have expanded the existing “Saver’s Credit” to allow for tax credits for contributions into 529s. According to Sens. Hassan and Collins, the change would have allowed a credit “worth up to 50 percent, or $4,000, of 529 account contributions made by low-and-middle income families.” Since states already manage 529s, which are broadly available to American families, tax reforms that leverage this existing infrastructure to administer the new program wouldn’t require new administrative costs. Unfortunately, current federal rules don’t allow parents to use funds saved in 529s for tutoring or homeschooling expenses, but several lawmakers have proposed expanding the allowable uses to cover these expenses.
While major reforms of federal K-12 education programs and tax laws may be unlikely in the 118th Congress, lawmakers are right to propose new ways to give lower- and middle-income families better options for educating their children. The broad support for the Education Choice for Children Act, including many civil society groups endorsing the legislation, shows real momentum for giving disadvantaged children better options.
Lawmakers on Capitol Hill should introduce legislation in the 118th Congress to reform major federal education programs and tax laws to give American students a better chance to learn. These bills should be at the top of the agenda for a new administration and Congress in 2025.