Federal Voucher Bill Offers Big Returns For Wealthy

The Educational Choice for Children Act of 2024 is the federal school voucher program that Betsy DeVos always dreamed of, combining the privatization of education with a sweet tax shelter for the wealthy. The whole thing is bad news.

ECCA proposes an education savings account voucher funded with tax credits. ESAs are super-vouchers that simply hand parents a stack of money and tell them to go spend it on education-flavored stuff. ESAs are in place in many states, and they have provided some serious oversight problems; State-level ESAs have been used for surfboards, televisions, theme park tickets, cosmetics, clothes, horseback riding lessons, and $1 million on Lego sets.

ECCA vouchers would be funded by contributions from wealthy folks who are looking for a tax shelter and investment opportunity (more about that in a moment) funneled through a Scholarship Granting Organization (SGO). The SGOs take the money, wrap it in a bow, and hand it over as vouchers to families.

We've seen this game played in many states, though the proposal is significantly worse in some features.

ECCA has a striking lack of oversight, accountability, or rules of any kind. There is no process or set of requirements, no vetting for qualifications or competence, for SGOs or the education vendors who eventually receive the taxpayer-funded vouchers. By the rules of the bill, pretty much anyone can play and collect voucher funds or the 10% share that SGOs get to keep. There are no education-related guardrails in this bill at all, and it doesn't even specify the size of the vouchers. It's almost as if it were mainly about something other than education. Ka-ching.

Student eligibility stops just short of universal. Students have to be eligible to attend public school (but not actually doing it, so students who have always been in private or home school are eligible). The family must be under 300% of the "area median gross income." The gross is of course larger than net, and the "area" means that every area, no matter how wealthy it may be, still has a huge population of eligible students.

So under this bill, very wealthy students attending very private schools would still get a chunk of federal money-- just like DeVos pushed for all her years in office.

But some of the sweetest benefits are for the people who use this as a tax shelter.

This gets a little wonky, but stay with me.

We all know that donations to charity can be claimed as a deduction on your federal taxes. If you donate enough to make it a better deal than just taking the standard deduction, you can get some tax help by giving to your favorite nonprofit.

But kicking money into the federal voucher program gets you 100% tax credit. Give a dollar, take a dollar credit. And you can do this for up to 10% of your income, which is the sweetest tax shelter that the feds offer anywhere in the tax code.

But wait--there's more!

You can donate cash-- or marketable securities! And as the Institute on Taxation and Economic Policy explained back in September, that means you can not only duck your regular tax burden, but you can also finesse your way around some capital gains taxes as well. ITEP figures that by using this part of the tax shelter, you can get $1.20 for every $1.00 you hide in this education-flavored tax dodge.

In other words, ECCA really isn't much to do with education. Just as much of the charter school industry was really about real estate investment, this is about creating an "instrument" for dodging taxes. It just happens to dovetail nicely with the privatization movement.

You may want to contact your Congressperson and tell them you do not support HB 9642, the Betsy DeVos Tax Shelter Act, because this bill unfortunately has many friends in DC. Because which wealthy Congressperson doesn't love a good tax shelter?