A $5 Billion Federally-Funded Private School Coupon Scheme
House budget promotes private school vouchers, offers new tax avoidance strategy for the wealthy
If you’re an incredibly wealthy person who is looking for a new way to avoid paying taxes, House Republicans have just the plan for you.
It’s a National School Voucher Coupon.
Sure, you don’t need a discount to send your kids to an elite private school - but you do need a huge tax break so you can get that pesky Uncle Sam off your back.
In addition to providing a new tax shelter for the very rich, the scheme also would essentially force vouchers on every state in the country - no matter the stated policy preferences of that state’s citizens.
The Institute on Taxation and Economic Policy (ITEP) analyzed the proposal as it currently stands and the findings are rather alarming:
The tax plan moving through the U.S. House of Representatives includes a provision granting extraordinarily generous treatment to nonprofits that give out vouchers for free or reduced tuition at private K-12 schools.[1] While the bill significantly cuts charitable giving incentives overall, nonprofits that commit to focusing solely on supporting private K-12 schools would be spared from those cuts and see their donors’ tax incentive almost triple relative to what they receive today. On top of that, the bill goes out of its way to provide school voucher donors who contribute corporate stock with an extra layer of tax subsidy that works as a lucrative tax shelter. Essentially, the bill allows wealthy individuals to avoid paying capital gains tax as a reward for funneling public funds into private schools.
What does it cost?
As seen in Figure 2, we estimate that this tax avoidance maneuver would deprive the federal government and state governments of more than $2 billion in capital gains tax revenue over the next decade.[8] This would come on top of the roughly $21.5 billion cost of the tax credit itself, bringing the net total revenue loss to over $23.6 billion.
These estimates of lost revenue (at a time when Congress is also considering cuts to programs like Medicaid and SNAP) don’t take into account state school funding formulas. These formulas are often based on “average daily membership” - or attendance.
If some kids take advantage of these new, nonprofit tax shelter vouchers, school districts could see less state funding.
If you wanted to undermine public education - even in states like Kentucky with no vouchers or charter schools - this would be the way to do it.
As an example, Tennessee public school districts are estimated to lose more than $50 million in state investment in year one of the state’s new, universal school voucher scheme.
Private school voucher schemes hurt public schools - and if the current version of the House budget passes, they could be coming to a school district near year whether you want them or not.
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Many of the top-tier private schools in Davidson County are not accepting vouchers: Oak Hill School, Harding Academy, University School, Harpeth Hall, Montgomery Bell, Ensworth, Franklin Road Academy...I wonder why. Perhaps they don't need to entice people because their value and educational excellence is well established. At any rate, I respect and admire them for turning down this funding as it only hurts public schools. I see many religious schools have opted to accept the 30 pieces of silver.