While many are aware of the substantial tax benefits in the GOP budget settlement aimed at affluent individuals and corporations, there’s a concerning tax provision buried in the legislation. This aspect introduces new tax shelters that allow billionaires to save considerable amounts by contributing their salaries towards private school vouchers.
The education-related options within this extensive tax and spending package enable donors to claim a 100% tax credit for their contributions to nonprofits that provide K-12 school vouchers. Unlike standard deductions for charitable giving, this credit essentially means that donors will get back their entire donation, with the federal government footing the bill. Other charitable organizations, such as those focused on disaster relief or food assistance, do not offer such substantial tax incentives. The Senate’s version of the bill caps this program at $4 billion in credits each year starting from 2027.
Tax experts indicate that beyond the credits, donors can benefit further by providing high-value stocks instead of cash, thereby bypassing capital gains taxes. This not only allows them to receive a full federal refund but also reduces their overall tax burden well beyond the actual cost of their donation. According to an analysis by the Institute for Taxation and Economic Policy (ITEP), even though the federal government might incur a cost of $134 billion over the next decade, it is expected that only around $126 billion will be raised for school voucher programs. This creates an estimated $10.5 billion in benefits for wealthy donors through tax avoidance.
Propublica, utilizing leaked tax data from ITEP, reveals potential gains for some rich supporters of school privatization during 2013-2018 had this program been implemented. For example, Jeffrey Yass could have profited $13.3 million, while Charles Koch might have seen $2.4 million, with the DeVos family’s hypothetical gains at around $4.6 million. These figures are speculative, assuming donors maximize the clause capped at 10% of their adjusted total income.
The funding for these tax credits must be sourced from somewhere else in the federal budget, which means less money is available for essential areas like military, public education, or veterans’ benefits. Among those endorsing educational choices for children is Heritage Action, a conservative advocacy organization that prominently supports school privatization. They have linked this bill to a policy agenda for Congress, promoting it alongside state-level measures. On the other side, organizations like the American Federation of Teachers are raising concerns through social media, labeling the provision as a diversion of funds away from public schools.
