Democrats Accidentally Deliver a Massive Win for School Choice

T he Democrats’ enormous $1.9 trillion “American Rescue Plan” (ARP) satisfied a laundry list of progressive policy priorities. But in a remarkable twist, it also included a $110 billion expansion of the child tax credit, a measure that holds the potential to become a massive, historic expansion of school choice.

The ARP, enacted by Democrats on a party-line vote, created an unrestricted, refundable child tax credit of $3,600 for children under six and $3,000 for children aged six to 17. The credit applies to all families making less than $150,000, and is paid out as a cash grant to parents if the sum is larger than their federal tax burden. (After a year, the credit will revert to $2,000 per child and become only partially refundable, although prominent Democrats are eager to make the more-generous version permanent.)

Democrats certainly did not intend to underwrite a mass exodus from traditional public schools — after all, the union-backed ARP earmarks $130 billion for public schools, regardless of whether they reopen their doors amid the coronavirus epidemic, while providing only a modest $2.75 billion to aid private schools. But the new child tax credit could prove a huge boon for parents interested in exploring educational alternatives.

Especially during the epidemic, millions of parents have expressed frustration with public schools’ instructional performance, difficulty accommodating student needs, and unhurried approach to reopening, making clear that they’re seeking other options. EdChoice reports that the share of parents who support school-choice options such as vouchers and education-savings accounts now tops 70 percent. Even before the pandemic, of course, plenty of low-income families wished for better educational options but couldn’t afford to buy their way into suburban school districts or private schools. The new child tax credit offers these families a lifeline.

While the $3,000 credit for school-age children is less than a quarter of what the average public school spends per child each year, it’s more than 60 percent of tuition at a typical Catholic elementary school. In fact, the credit’s $3,000 value isn’t far off from the size of state-issued scholarships in leading school-choice programs. For instance, Indiana, North Carolina, and Ohio operate three of the nation’s five largest voucher programs, and the average award those three states offer is worth between $4,000 and $5,000 per child.

What’s more, the new child tax credit could easily be combined with other pandemic relief to supersize the amounts available to support school choice for low-income and middle-income families. The ARP shovels $350 billion into state and local government to compensate for feared budget shortfalls that no longer appear likely to materialize, meaning state leaders will have lots of money at their disposal and great discretion about how to spend it. Meanwhile, there is considerable leeway in how the $130 billion earmarked for public schools can be used.

Creative, education-minded governors and legislators should look at this tidal wave of cash and see vast opportunities to give families new options, especially after twelve months in which a one-size-fits-all public-school bureaucracy has never seemed more anachronistic. Governors should explore whether they can augment the federal tax credit for any family that spends its funds on school tuition. A 50 percent state match for eligible families who chose to use the funds to pay tuition would make the credit worth about as much as the voucher offered in leading school-choice states, giving families good reason to take an extra look at private-school options.

State leaders should also explore ways to augment the credit with education-savings accounts, which allow parents to opt out of local public schools and, in return, assume much more control over how their child’s educational dollars are spent. Just last week, West Virginia’s legislature passed the nation’s newest education-savings-account program, providing eligible families with $4,600 per child. Marrying that sum with the new federal tax credit alone would yield $7,600 per child, a figure well above the tuition cost at nine out of ten West Virginia private schools. And all such a marriage of funding streams would require is making eligible parents aware of the choices they have.

For families, a windfall of school-choice funds could mean the difference between being trapped in an unsafe, failing public school and gaining entrance to a better private school. That would be especially significant at a moment when the doors of most private schools are open, even as two out of three public schools aren’t offering full-time in-person instruction. And for private schools wracked by the challenges of the past year, the influx of students could be a godsend.

Conservatives have spent much of the recent past wringing their hands, often with good reason, over the unintended consequences of Republican-led education reforms. The shoe is now on the other foot. If even a small portion of the credit is ultimately used to expand private school choice, the ARP will have done more to promote school choice than even the enactment of the Trump-era Education Freedom Scholarships would have. Quite by accident, Washington has provided families frustrated by shuttered schools and lethargic bureaucracies an opportunity to chart a better course. State and local leaders would do well not to squander that gift.

Frederick M. Hess is the director of education-policy studies at the American Enterprise Institute. RJ Martin is the program manager of education at AEI.