The federal government will roll out a new tax-credit program in 2027 to expand school choice. Taxpayers will be able to receive a dollar-for-dollar federal tax credit for donations of up to $1,700 annually to a scholarship-granting organization (SGO) in Missouri—or any other participating state. The SGO then distributes scholarships to families seeking alternatives to their residentially assigned public schools.
In a previous post I wrote about the new program, focusing on the challenge of deciding which educational expenses should qualify for scholarship funding.
Over at Education Next, Rick Hess has a thoughtful piece on other aspects of the program. As both a school choice advocate and an advocate of fiscal responsibility, he opens with a concession, acknowledging the potential loss of tax revenue the program could create at a time when the federal debt is growing rapidly.
He then makes what I think is the right point: While it is unfortunate that the federal budget is off the rails, it is hard to get too worked up about this program when (a) it is a drop in the bucket compared to our broader fiscal problems, and (b) so much of our debt-financed spending benefits older Americans. If we’re going to keep borrowing, why not direct at least a small share toward expanding opportunities for children?
I share Hess’s bottom-line sentiment. I wish the federal government managed its finances more responsibly. But since that does not appear likely anytime soon, investing a bit more in the children who will ultimately inherit—and help repay—that debt seems sensible to me.
Turning to the program itself, Hess raises an important practical concern. Even though this is a dollar-for-dollar tax credit, which means it is effectively costless for taxpayers to participate, we should not assume it will be widely used. Many taxpayers may be unaware the credit exists. Others may doubt they’ll actually receive it or may not know how to make a qualifying donation to an SGO. Even modest uncertainty or inconvenience can discourage participation.
These are legitimate concerns. The new scholarship tax credit has the potential to generate substantial resources to expand school choice, but realizing that potential is not automatic. As Hess puts it, “I don’t put a lot of stock in the casual assurance that taxpayers will jump through hoops to give money away simply because, as one very prominent champion explained to me, ‘It’s a good thing to do.’”
Hess’s piece points to one of the program’s biggest implementation challenges. Helping taxpayers understand the credit—and making participation as simple as possible—could make an enormous difference. Show-Me Institute analysts will certainly be doing our part, and I hope many others will as well.
