Education Week - September 12, 2018 - 12

GOVERNMENT & POLITICS
How a Proposed Tax Rule Could End Up Hurting School Vouchers
By Arianna Prothero
A tax rule proposed by the Trump
administration as part of a crackdown
on blue states trying to circumvent
parts of the new GOP tax law could
hurt school vouchers popular in many
red states.
Tax-credit scholarships are voucherlike programs funded through tax
breaks and private donations that
have grown in popularity as a workaround to state constitutions that
strictly prohibit public dollars flowing
directly into private, religious schools,
as they do in traditional voucher programs.
Private school choice advocates are
up in arms that tax-credit scholarships are getting swept into another
standoff between the Trump administration and Democratic-led states.
Under the Tax Cuts and Jobs Act
passed in 2017, wealthy residents in
states such as New York and California face sizable increases in their federal tax bills because of a $10,000 cap
on state and local tax deductions they
can make on their federal returns.
Democratic lawmakers allege the socalled SALT-cap unfairly targets leftleaning states.
In response, a few states came up
with ways to circumvent the cap, modeled off of tax-credit scholarship programs, said Carl Davis, the research
director at the left-leaning Institute
on Taxation and Economic Policy.
State and local governments in Connecticut, New Jersey, and New York

created charities where people could
donate money to help fund public services such as education or health care
and receive generous tax credits in
return. Donors could turn around and
claim 100 percent of the money they
gave to those government-run charities as a charitable donation on their
federal income tax return.
Other states are considering similar
programs to help their high-earning
residents.
But now the Treasury Department
and the IRS have put the kibosh on
the scheme with a new rule that says
that people can no longer receive the
federal charitable deduction on donations that they have also received a
state tax-credit for-basically, no more
double dipping.
And that includes tax-credit scholarship programs enacted well before
the 2017 tax overhaul that use tax
credits to incentivize donations to
groups that provide scholarships to
students to attend private schools.

Generous Programs
"These taxpayers want to look like
philanthropists when they're not,"
said Davis. "The IRS is saying, we
don't care who you are donating to, if
you get your money back, you get your
money back, and you can't count it as
a charitable donation."
Many tax-credit scholarship programs are so generous-sometimes
offering a dollar-for-dollar tax-credit-
that donors could actually make

money off of their donation, if they
claimed the federal deduction on top
of the tax credit.
Davis said this is the case in 12 of
the 18 states that have created taxcredit scholarships. Some states such
as Florida and Illinois already prevent

We're dealing with a
lot of unknowns.
It's not fair to
taxpayers, and it's
certainly
not fair to these kids
who are relying
on scholarships."
LESLIE HINER
EdChoice

donors from claiming both state tax
credits and federal charitable deductions on the same donations, he said.
Tax-credit scholarship programs
that relied on offering big benefits to
reel in donors interested in the tax
breaks more than school choice stand
to lose the most, said Leslie Hiner,
the vice president of legal affairs at

EdChoice, an advocacy, lobbying, and
research organization.
School choice advocates were already worried that uncertainty over
the new tax law was going to lead to
a decline in donations to tax-credit
scholarship programs-a concern
that's now compounded by the fact
that the new IRS rule means there's
markedly less benefit to participating
in many state programs.
"At this point, we're dealing with a
lot of unknowns," said Hiner. "It's not
fair to taxpayers and it's certainly not
fair to these kids who are relying on
these scholarships."

Advocates Split
EdChoice estimates the new rule
could impact 250,000 mostly lowincome students. The proposed rule
does not apply to corporate donations
to tax-credit scholarship programs.
Voucher proponents have criticized
the Treasury Department and the
IRS, saying that the proposed rule
could have been tailored to only target the new government-run charities that have popped up in response
to the tax law.
While technically, yes, that would
have been possible, it would have
been a very political move, said Steven Rosenthal, a senior fellow at the
Urban-Brookings Tax Policy Center.
"Just because you can draft a rule
to hit one group but not another,
doesn't mean that it's the correct rule
from a policy standpoint," said Rosen-

thal. "I don't think it would be hard to
give the red states, the school choice
people, what they wanted ... but as a
policy matter I think it would be completely inconsistent and foolish."
But not all school choice advocates
oppose closing the loophole. Excellence in Education, an influential
education reform lobbying and advocacy group founded by former Florida
Gov. Jeb Bush, called the proposed
rule "sound tax policy."
"Just like no school choice supporter would advocate for a 130 percent state tax credit, neither should
we push to preserve a loophole in the
federal tax code that allows donors to
turn a $1,000 donation into $1,300
in lower taxes," Adam Pesheck, the
managing director of opportunity
policy at ExcelInEd, wrote in a recent
policy brief. He proposed delaying the
implementation of the rule in order
to allow states to adjust.
This scuffle over the SALT-cap and
school choice may not be over. There
may be lawsuits and the Treasury
Department and the IRS could reverse course, said Rosenthal.
"These are only proposed regulations," he said.
Coverage of how parents work with
educators, community leaders and
policymakers to make informed decisions
about their children's education is
supported by a grant from the Walton
Family Foundation, at waltonk12.org.
Education Week retains sole editorial
control over the content of this coverage.

DeVos' Trip to South America Focuses on Workforce Prep
Education secretary visits
gathering of G-20 officials
By Alyson Klein
How can countries collaborate to make sure
that their students are prepared for the jobs
of the future?
That was the question facing U.S. Secretary
of Education Betsy DeVos and her counterparts from around the globe as they met in
Mendoza, Argentina, last week for the firstever G-20 meeting of education and employment ministers. The summit focused on the
"future of work."
DeVos took the opportunity to visit career
and technical education programs in Argentina and Chile.
In a speech to the summit, DeVos advocated
for individualized instruction to ensure students get the career preparation they need.
And she suggested that students be encouraged to think beyond the traditional fouryear-college track.
"Students need multiple and flexible pathways to pursue the opportunities that our
global economy offers," DeVos said, listing
possibilities including industry-board-recognized certificates, two-year degrees, and

apprenticeships. "All of these are valid pursuits. Each should be embraced as such. If
it's the right fit for the student, then it's the
right education. And importantly, no stigma
should stand in the way of a student's journey
to success."
The G-20, or "Group of 20," provides a forum
for countries, including many of the world's
largest economies, to discuss international
development and cooperation.
The ministers gathered to talk about how
their nations can identify and help students
develop the digital and other skills that will be
needed for the jobs of the future, with a special
emphasis on vulnerable populations. And the
agenda included discussions on how policymakers can better coordinate with business
and other sectors.

21st Century Skills
Ultimately, the meeting resulted in a declaration that calls for putting education "at the
center of the global agenda." It says the G-20
nations will work to "ensure inclusive and equitable quality education and promote lifelong
learning opportunities for all."
DeVos said in a conference call from South
America that the document was "very consistent with all of the themes that we've been
talking about. The need for America to focus

12 | EDUCATION WEEK | September 12, 2018 | www.edweek.org

on opportunities for students today and also
for [those returning to the workforce]..."
In particular, the summit stressed the need
to help students develop so-called 21st century
skills, such as communication and collaboration; to promote entrepreneurial skills, such
as leadership; to foster the development of science, technology, engineering, arts, and math;
and to promote career and technical training.
And DeVos said that some of the other countries in the G-20 are making more progress in
these areas than the U.S. "There are too many
other countries that are further down the path
of adopting some of these themes and embracing some of these opportunities," she said.
In particular, DeVos was impressed with a
visit to an after-school program in Mendoza
that has a strong focus on science, technology,
engineering, and math education.
"It is emblematic of where we need to go for
students to get them more engaged in and
taking more ownership of their learning and
education," DeVos said.
DeVos also traveled to Santiago, Chile,
where she visited Liceo Industrial Eliodoro
García Zege, a school that describes its mission as "professional technical training, based
on competencies, with a projection toward
higher education." She also visited Instituto
Nacional de Capacitación Santiago, which offers postsecondary training.

And she met with her Chilean counterpart,
Minister of Education Marcela Cubillos, as
well as U.S. Ambassador Carol Perez.
While there, DeVos met with Minister of
Education Marcela Cubillos, who is a member
of the political party that is most supportive
of choice.
DeVos is one of the biggest choice cheerleaders in the U.S. and has pushed for more
money for vouchers here. But she said the two
didn't delve deeply into policy, and that their
conversation focused much more on workforce
preparation.
Chile has one of the most robust school
choice programs in the world. It was established by dictator Augusto Pinochet back in
1980. The state allocates a certain amount of
funding for each child's education, and those
dollars can be spent in a public or private
school.
School choice fans have long celebrated
Chile's system. Jennifer Pribble, an associate professor of political science and global
studies at the University of Richmond, described it as "Milton Friedman to a T," a
reference to the conservative economist who
championed the modern concept of vouchers.
The system may have helped more Chilean
students enroll in school, but it also "introduced huge inequality into the system,"
Pribble said.

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Education Week - September 12, 2018

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