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Educational advance for parent choice: 529 accounts available for K-12 public, private and religious schools

Now that I am back from a Christmas break, I am answering emails– and unsubscribing from others I never signed up for (most are from worthy friends but there is a limit).

One email I deleted, then quickly retrieved, was from Thomas W. Carroll, executive director of the #EdTaxCredit50 Coalition. I am glad I did.

Mr. Carroll has an exciting report for all of us who understand that when parents are empowered with choices for their children’s education, not only do students have a better shot at a great education but all schools respond to market competition by stepping up their game so they can attract and keep students.

Choice also gives teachers a broader market for their unique skills, and career options, as well.

The new tax bill will not only encourage schools to offer the best educational opportunities, it will also bring new schools into the marketplace and strengthen the private and religious schools in Minnesota. Parents will still “pay twice” by paying taxes for the public school and tuition for the school of their choice but at least Congress, as you will read below, has expanded 529 accounts for all K-12 schools.

Unfortunately, homeschooling families were cut out of the final bill but there is hope that they, too, can benefit from future tax changes that recognize the immense sacrifice and expense of homeschooling families.

Mr. Carroll’s summary in The Hill is terrific. You can read it in its entirety here.

Parents and others will have a new tax-advantaged way to save money for their children to attend the public, private or religious school of their choice under the tax reform plan recently adopted by the U.S. Congress with President Trump’s support.

Under the new law, the popular 529 college savings accounts will be expanded to allow parents to use these accounts to save tax-free for K-12 public, private and religious tuition. The measure affects 50 million students across the United States. Senator Ted Cruz (R-Texas), the idea’s champion, notes that the reform amounts to “the most significant school choice victory ever adopted.” An earlier Cruz amendment to the Senate tax plan provided the language ultimately used in the final bill.

[Photo from The Hill, Getty Images]

A grassroots coalition of more than 70 organizations across the nation assembled by the #EdTaxCredit50 Coalition, my organization, supported this monumental reform. [Note: Center of the American Experiment, of course, signed on.]

The 529 reform will be able to expand quickly because there already are 13 million 529 college accounts today, with about $300 billion in total savings. More than 75 percent of these savings are held by families with $150,000 or less in income. As of January 1, withdrawals from these accounts and any new 529 accounts may be used to pay K-12 tuition. (Emphasis added)

While the 529 expansion is a great outcome in and of itself, it also helps lay the foundation for broader school choice victories in 2018. The 529 reform has several important features that can serve as a precedent for future action:

  • Applies to parents and students in all 50 states;
  • Doesn’t require any further state approvals or “opt in;”
  • Includes working-class and middle-class families, not solely the economically disadvantaged (in fact, no income threshold is applied at all, making it akin to economist Milton Friedman’s vision of universal parental choice); and
  • Imposes no new regulations on private schools or any infringements on religious liberty.

Each of these is a significant feature that naysayers — including many in the school choice movement — claimed could not be attained in the current political environment.

Unfortunately, not a single Democrat voted for the tax bill in either house, no Democratic senator voted for the Cruz amendment, and no Democrat voted to confirm Betsy DeVos as U.S. Secretary of Education. This isn’t a partisan observation, just a statement of fact.

This partisan reality suggests that school choice advocates should take advantage of Republican control of the White House and both houses of Congress while it lasts.

What should still be done?

At the top of the list is a national tax credit to encourage charitable donations to nonprofit K-12 scholarship funds. For every dollar donated to a nonprofit scholarship fund, a taxpayer would reduce his tax burden by a dollar. The plan would inject charitable dollars into the hands of parents to make school choice and attaining a quality education a reality for millions of American children. This idea has the broadest grassroots support of any school choice idea. Presently, more than 240 organizations, including more than 40 labor unions, support a K-12 scholarship tax credit.

This idea could be improved by also encouraging charitable donations to apprenticeship and workforce preparation programs. This additional change would help close the “skills gap” that leaves millions unemployed at the same time that millions of jobs go unfilled.

Second, there is broad support for ensuring that the families of members of the U.S. military are afforded the broadest choice of public, private and religious schools for their children. Many military families are forced to send their children to inferior district schools near military bases without being given additional options. This simply is not acceptable given the sacrifices made by men and women in uniform and their families.

Third, the recently adopted expansion of 529 savings accounts to include K-12 tuition should be expanded to encompass homeschooling expenses. Homeschooling was included in the original Cruz amendment, but was deleted as a result of a last-minute procedural maneuver by Senate Democrats, led by Senators Ron Wyden (D-Ore.) and Bernie Sanders (I-Vt.). This partisan ploy rubbed a lot of Republican members of Congress the wrong way and there is renewed interest in both chambers to allow homeschooling families to save their own money in a tax-advantaged way, especially since these families pay taxes for schools they do not use.

President Trump and the U.S. Congress can be proud of the recent school choice victory, but no time should be wasted building on this victory in 2018.

What a great way to begin 2018.

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