For Immediate Release

WASHINGTON, D.C. — The federal government announced Thursday that it is moving ahead with a new tax scheme that could send billions of dollars to private-school scholarships, and states that participate would have little ability to decide how that money is used. 

The Department of the Treasury released a proposed rule for the new federal voucher tax credit created by the 2025 reconciliation law known as the “One Big Beautiful Bill Act (OBBBA).” The result of this tax credit program and the Treasury proposed rule is that critically important funding will be steered away from public schools and states that opt into the program will have very limited ability to shape the way the program is implemented. Thirty states have already opted in, while several other governors have said they are waiting to review the Treasury’s proposed rule before deciding.

“The federal voucher program is this Administration’s latest attack on public education,” said Johnathan Smith, Managing Director of Education and Federal Advocacy at the National Center for Youth Law (NCYL). “The Treasury has left a bad law intact and taken away the tools a state would need to limit the damage. This program will shift billions of dollars in federal revenue each year away from public schools that are obligated to serve all students and toward private schools that can pick and choose the students they educate. The Treasury’s proposed rule only cements the worst aspects of the program, and governors who held off deciding whether to opt in until they could read this rule now have their answer.”

The program lets any taxpayer give up to $1,700 per year ($3,400 for married couples filing jointly) to a “Scholarship Granting Organization” and take the full amount off their federal tax bill. Those organizations can then pay for private school tuition and other education costs. The program and the proposed rule provide only very limited options for directing the funds to public schools.

The Treasury estimates that about 96 percent of children in participating states would qualify, and that by 2030 more than 11 million taxpayers could make nearly $26 billion in contributions each year. Because the credit is dollar-for-dollar, that is close to $26 billion a year in federal revenue the government would give up. The Joint Committee on Taxation estimated the program’s cost at roughly $26 billion over 10 years, and the law sets no cap on total credits. By comparison, the federal government spends about $18.4 billion a year on Title I-A and $14.6 billion on IDEA state grants, its two largest discretionary K-12 investments.

Private schools that accept these scholarships are often not bound by the same civil rights obligations or public reporting requirements as public schools, which leaves parents with little way to compare student performance or confirm that a school meets basic standards. Private school tuition also tends to exceed the value of a voucher, which can keep these schools out of reach for low-income families, and the credits will most likely only end up subsidizing families who were already paying private tuition.

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The National Center for Youth Law centers youth through research, community collaboration, impact litigation, and policy advocacy that fundamentally transforms our nation’s approach to education, health, immigration, foster care, and youth justice. Our vision is a world in which every child thrives and has a full and fair opportunity to achieve the future they envision for themselves.