Everyone listening to me knows about the so-called Big Beautiful Bill with its tax cuts and spending cuts, right? But how many know that it also includes a national tax credit which would be the first federal voucher program by which families paying for private or religious education in grades K through 12 would be subsidized. This law is a danger to already underfunded public schools and it’s already on the books.
When I taught economics I led countless discussions with my students about the proposal to change how education was funded. The idea is simple. Though the government should fund education there is no good reason to spend that money only on public schools. Instead, every parent should be allowed to determine where the government money to educate her or his child is spent. Every family should get a voucher to cover the costs of their child’s education and they can direct it to any school - private, religious, public, etc.
One place where the voucher approach to funding public education is in Milton Friedman’s book "Capitalism and Freedom," chapter 6.
Currently, taxpayer funded district public schools educate the vast majority of K through 12 students - over 80 percent. Data for 2021 for example shows that “81.9% (65.1 million) of students enrolled were in public school and 18.1% (14.4 million) were in private school.”
When voucher programs have been initiated, public schools lose funding and that’s the point. This is usually sold to the public as introducing choice into every family’s K - 12 education opportunities. That is a bogus argument. Everyone can choose to send their children to private or religious schools. A voucher program makes every other taxpayer help finance that choice - draining money from the local public school district. When voucher programs have been instituted, the local public school loses the per pupil revenue but they still have to cover the fixed costs.
When these state-wide programs have been proposed and there are referenda, the voters mostly reject them, recognizing that they would have a detrimental effect on the local public schools which – let us remember, educate the vast majority of children in this country.
Here are some recent examples.
The so-called Big Beautiful Bill includes a federal tax credit that would be in effect, a federal voucher. Up to now, there have only been state efforts to introduce vouchers.
Starting January 1, any taxpayer can donate up to $1,700 a year to an approved scholarship organization, and get that amount back as a federal tax credit - that’s dollar for dollar. The money lost to the treasury is, of course, made up by other taxpayers. That shifts the financing of private education from the families utilizing it to those tax-payers who do not make those “donations.”
According to data from the Institute on Taxation and Economic Policy (ITEP), there are roughly 138 million taxpayers eligible to claim this credit. Depending on how many of these eligible filers actively redirect their tax liability to Scholarship Granting Organizations (SGOs) starting in 2027, the yearly loss to the Treasury scales would be $50 billion a year if 20% of those taxpayers make these donation.
And what is an “acceptable scholarship organization?” As with all new policies, the devil is in the details. States that opt in will have to carefully scrutinize these organizations to see that they are not engaging in discrimination, (many private schools routinely figure out ways not to admit students with learning disabilities for example) and that they are only funding schools that do well educating children. (In New York State there is strong evidence that some religious schools severely skimp on basic education for their K-12 students.)
The real kicker is that to the extent that the amount available per student via the voucher does not cover the full cost of a private education, such a program will amount to nothing more than a subsidy to the high income family who can already afford to pay.
I know that Governor Hochul is on record in support of NY State “opting in” to this program. I imagine this is because the idea that this increases the choices available to families when it comes to their children’s education. But national data shows that low-income families make up about 30 to 37% of enrollees with the vast majority coming from middle to high income families. In other words, if Hochul sticks to her plan to opt in to this new program, the vast majority of New Yorkers benefiting from it will not be low income families - another example of government helping the rich get richer at the expense of the rest of us.
Michael Meeropol is professor emeritus of Economics at Western New England University. He is the author with Howard and Paul Sherman of the recently published second edition of Principles of Macroeconomics: Activist vs. Austerity Policies.
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