WASHINGTON — As Friday night turned into Saturday morning, Vice President Mike Pence cast a tiebreaking vote in the Senate to extend a tax benefit available for higher education to families paying tuition for private elementary and secondary education — or even home-schooling their children.
The vote on the amendment by Sen. Ted Cruz, R-Texas, was emblematic of the sweeping tax bills entering final negotiations between House and Senate Republicans. Provisions in both measures could change families’ approach to elementary and secondary education, and every type of school stands to benefit except those attended by 90 percent of the nation’s students — public schools.
Under the House and Senate bills, families who can afford to put money away for private or sectarian schools each month would be able to watch their savings earn interest and capital gains free of taxation. In the Senate bill, even home schoolers could withdraw up to $10,000 a year for school expenses in their own living room — from tax-favored savings accounts.
By contrast, the drastic curtailing of state and local tax deductions in both bills could hamstring local governments’ efforts to finance their public schools. State, county and city governments have always struggled to raise taxes or pass bond measures for schools, but were able to argue that increases in sales or income tax rates could be deducted from federal income taxes. In the House and Senate bills, the state and local tax deduction would be reduced to a deduction of up to $10,000 of property taxes each year and nothing else.
The National Education Association released a state-by-state analysis of how the tax bill would affect public schools, concluding that in the next decade, $370 billion worth of state and local revenue and 370,000 education jobs are at risk.
“We have provisions that are incentivizing parents to keep students in private schools or send them to private schools,” said Sasha Pudelski, assistant director for policy and advocacy at the American Association of School Administrators. “If there’s going to be tax breaks in the bill, giving it to the parents in the private education system over the public education system doesn’t make any sense.”
How generous the new tax preference for private education would be is subject to debate. As with current 529 plans, contributions would not be tax deductible, but interest and capital gains would not be taxed. Withdrawing funds for elementary school would not give families much time to see their investments grow tax-free. That alone has divided advocates of school choice.
“As currently structured, 529 plans are not designed to deliver significant benefits to poor families in college,” wrote Nat Malkus of the conservative American Enterprise Institute. “Giving families flexibility to spend those funds sooner does nothing to address their capacity to save; it only minimizes the potential benefits.”
In urging his colleagues to vote for the amendment, Cruz said the expansion “ensures that each child receives an education that meets their individual needs, instead of being forced into a one-size-fits-all approach to education, or limited to their ZIP code.” He said the provision would “help working class and middle-income families save and prepare for their children’s educational expenses.”
But that assumes that those working-class families have money to save, and many do not.
“The opinion ranges from being marginally helpful, to a nothingburger, to being harmful because it plays into the narrative that school choice is about helping rich people,” said Michael J. Petrilli, president of the Thomas B. Fordham Institute, which favors government-funded vouchers for private school tuition. “Are there people out there who cannot afford school choice and will now be able to? No.”
Some conservatives say the amendment falls well short of the president’s request for Congress to “pass an education bill that funds school choice for disadvantaged youth.” Instead, they say, it benefits wealthy families who already have thousands of dollars at their disposal to pay for their children to attend nonpublic schools.
But other conservative groups, like the Heritage Foundation, which began advocating the expansion of 529 plans in 2012, praised the amendment. Lindsey M. Burke, director of the foundation’s Center for Education Policy, said that when more families learned that anyone could contribute to the savings plans, they would become more popular at all income levels.
Burke disagreed with public school advocates that the 529 expansions would hurt public schools by incentivizing families to leave them.
“If their district-assigned school is a good fit, they have nothing to worry about,” she said.
For home schoolers, the Cruz amendment was a cause for celebration. For years, home school advocates have denounced what they called a “discriminatory” tax code. Not only were 529s limited to just college costs, but existing K-12 expense accounts, called Coverdell Education Savings Accounts, are recognized for home schools only in a handful of states where they can win designations as private schools. Coverdell contributions are limited to $2,000 a year, while contributions to 529 accounts can reach $14,000 a year without incurring gift taxes.
Will Estrada, a lawyer for the Home School Legal Defense Association, called the Cruz amendment a “massive win” for home-schooling families.
Estrada said that since the Trump administration took office, the organization had been working behind the scenes with the education secretary, Betsy DeVos, and Ivanka Trump’s staff to have the nearly 2 million students in home schools recognized. Home-schooling families spend about $500 to $600 a year on average on instructional materials like books, Estrada said.
“We want to be treated fairly,” he said.
For public school advocates, the 529 expansion was just the latest in a series of decisions they said illustrated the Trump administration’s disinvestment in public education.
“It’s just icing on the cake,” Pudelski said. “It seems they’re just asking how many different ways can we not support public schools.”