Key Decision Points for a National K–12 Scholarship Tax Credit

As the Senate continues to attempt a fix of Obamacare, debate continues on the contours of a sweeping federal tax reform to be acted upon once health care is put to bed. The idea of a national K–12 scholarship tax credit continues to gain steam as a key aspect of overall tax reform and as a measure that would put a human face on an otherwise arcane bill. But important disputes remain over what a national K–12 scholarship tax credit might look like. The two key areas to be decided are faith and federalism.


Bills recently re-introduced by Representative Todd Rokita (R-IN) and Senator Marco Rubio (R-FL) include a key provision that has inflamed much of the faith community. Under their bills (H.R. 895 and S. 148), faith-based scholarship organizations would be placed in the untenable position of only being able to participate if they agreed to award scholarships to students attending any private school, regardless of its religious affiliation or lack-thereof.

The bills specifically prohibit scholarship organizations from limiting their scholarships to being redeemed in a “group of schools.” Every collection of religious schools is by definition a “group of schools.” Thus, religious scholarship groups would face the choice of giving scholarships to promote other faiths or totally nonreligious schools—which violates their religious freedom to focus on advancing their own faith. If they refuse to “secularize,” they would be shut out from the flood of philanthropy that could come from a scholarship tax credit initiative at the federal level.

Some have argued that parents should be allowed to choose any school, a position I agree with—just not in this ham-handed way. Any adult should be able to decide which brand car they would like to drive. But that isn’t the same as mandating that Tesla can only sell cars in the U.S. if they agree also to sell Subarus. The way to maximize parental choice is to encourage lots of secular and religious scholarship organizations to participate. A mandate encouraging religious scholarship groups to opt out of the tax-credit initiative—because their belief in religious freedom leaves them with no other option—will shrink, not expand, parental choice.

Aligned against the “secularize or be shut out” approach is a growing coalition that now numbers more than seventy organizations including the U.S. Catholic Conference of Bishops, the National Catholic Educational Association (NCEA), the Council for American Private Education (CAPE), the Faith and Freedom Coalition, the Christian Coalition, the Association of Christian Schools International, the American Association of Christian Schools, and Agudath Israel of America, which represents the Orthodox Jewish community.

The Trump Administration most likely would not put themselves at risk of alienating every major faith-based group. So one suspects this anti-religious approach will fall by the wayside. It is also possible the Congressional sponsors will change this provision before the Trump Administration even gets around to a decision, given the intense counter-reaction this one provision has sparked.


The U.S. Constitution lays out a federal approach in which specific powers are enumerated for the national government with all remaining powers—under the Tenth Amendment—reserved to the states or the people.

The power of federal taxation clearly is a power of the federal government, but nonetheless some conservatives—sensitized by numerous overreaches during the Obama era in the area of education—are urging that any national scholarship tax credit be subject to approval on a state-by-state basis.

This is an extraordinary request because no element of the federal tax code is subject to state approval. That is for a good reason. The U.S. Constitution includes the Uniformity Clause, which is specifically designed to ensure that all federal taxpayers who are similarly situated are taxed the same across the nation.

States conceivably could be given authority over details of a scholarship tax credit—for example, designating which nonprofits are eligible to serve as scholarship-granting organizations, and which rules they and participating schools would need to follow. But states cannot decide whether federal taxpayers located within their state boundaries can take a federal tax credit at all.

An analogous situation would be the federal law that allows federal taxpayers nationwide to save tax free for college savings, but empowers states to have a role in the administration of 529 plans within their states.

Advocates for a large state role, however, have not made a strong case that state legislatures are immune to some of the same political pressures as at the federal level. The best “federalist” approach may be to follow the doctrine of subsidiarity and leave key decisions in the hands of parents.

Defining the role of states will be a crucial decision for the Trump Administration for two reasons. First, if states are given the ability to prevent federal taxpayers within their state from receiving a federal tax credit, the federal legislation may be subject to legitimate constitutional challenges.

Second, any plan that stipulates a state must first “opt in” before that state’s federal taxpayers may receive the national K–12 scholarship tax credit will effectively give the teachers unions the ability to stop the scholarship tax credit in virtually any state that has a Democratic governor or Democratic control of either legislative chamber.

One of the biggest political benefits of a scholarship tax credit for President Trump is the ability to reach the millions of “scholarship moms” (potential voters) such legislation would create.

A state opt-in mechanism—because of the sway teachers unions have over the Democratic Party—may exclude twenty-five states (six states totally controlled by Democrats and nineteen others partially controlled by Democrats).

In this mix of excluded states are six that President Trump won and presumably would like to win again. These include Alaska, Louisiana, Montana, North Carolina, Pennsylvania, and West Virginia.

In sum, a decision is looming on whether the Trump Administration will put forward a national K–12 scholarship tax credit. If it decides to proceed, the Trump Administration needs to decide where it stands with faith-based groups and how it defines federalism in the context of a national tax credit. If it tilts too far the wrong way, it could run afoul of its base and risk allowing the teachers unions to rob the president of the support of scholarship moms in key states.

— Thomas W. Carroll

Thomas W. Carroll is president of the Invest in Education Coalition based in New York.

This post originally appeared in Flypaper.

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