On school choice, I hope Democrats pick Door #3

OBBBA tax credits, the importance of high standards, the waste in Master's degrees, plus algebra gatekeepers

Earlier this month, Jon Valant from Brookings had a nice piece on the One Big Beautiful Bill Act’s (OBBBA) scholarship tax credits. Largely echoing my arguments from January, Valant had been sharply skeptical on earlier proposed versions of a federal tax credit program.

But now, after the final version passed last month, Valant is taking a somewhat more optimistic tone. There’s still a lot to be determined, but Valant argues you could now sort of squint at the text of the bill, “flawed as it is, and see how this could become a boon for educational choice in red states and educational enrichment in blue states.”

What, wait? Read that again, and then let me explain…

Photo by Zulian Firmansyah on Unsplash

The first thing to note is that the final text of the bill makes the actual tax credit component pretty generous. Taxpayers who donate up to $1,700 to Scholarship Granting Organizations (SGOs) can receive a 1:1, nonrefundable tax credit. The “nonrefundable” aspect means that it can’t exceed a taxpayer’s total federal tax liability. But it’s a direct reduction in tax liability, which will make donating to SGOs attractive to wealthier taxpayers who already itemize their taxes.

The second thing to note is that this program could potentially channel billions of dollars toward the SGOs. But critically, the money will come out of the federal Treasury. If, say, California or New York opt out, their federal tax dollars can still subsidizing SGOs in other states. (Note: In an earlier version I suggested that the tax credits were only available if their state opted in. That’s not correct. If California doesn’t opt in, their taxpayers can get the federal tax credit if they donate to another state’s SGOs. The text has been updated accordingly.)

But the key point is that there’s nothing in the law that prevents states from structuring SGOs as they please. The law says SGO recipients have to be within 300 percent of the local median poverty line, but that’s barely a cut off at all. In Fairfax, Virginia, where I live, the income cut off would be $492,000 a year! I personally don’t think people making $492,000 a year deserve a federally-backed “scholarship” from an SGO to attend a private school, but there’s nothing stopping a state from lowering that income threshold.

And this is where Valant introduces us to Door #3: The law says little about what types of activities the money can (or must) be spent on, and the list of “qualified expenses” for an SGO is quite broad. In other words, the money going into SGOs does NOT have to be spent on a traditional private school.

Instead, a Blue state governor could decide they wanted to only approve SGOs that provided tutoring services for kids who are struggling in reading or math, or personalized services for students with disabilities, or dual enrollment or CTE or other advanced high school courses, or summer enrichment programs a la Tim Daly’s proposal to give every kid a “baller” summer. The law also says nothing about states adding their own program requirements for the SGOs, so Dems could make sure the programs are delivering real outcomes for students and not discriminating based on race, sex, religion, gender, etc. (Note: See Travis Pillow’s ideas on this as well.)

And this is where I would want liberals to lean in and get creative. There’s money on the table. State leaders should take that money and shape the scholarship programs as they see fit. Democratic politicians shouldn’t let their political opposition to The Orange Man or vouchers or how this program might get run in Red states from implementing their own versions in ways that align with their values. Pending some blatant new rule from the Treasury Department, the states will be able to—and should—limit who gets the money and what they can spend it on. But they should take the money.

Other odds and ends

Good Reason Houston reports that, “Nearly 145,000 more Houston area students attended A- or B-rated schools in 2025 than in 2023, and the share of students attending D- or F-rated schools fell from 32% to 12%.”

Rick Hess has a good metaphor about what schools can learn from swimming tests.

NCTQ’s Katherine Bowser on how school districts continue to spend billions of dollars on ineffective Master’s degree premiums.

Don’t miss Darrin DeChane, Takako Nomi, and Mike Podgursky on the predictive power of standardized tests. They write:

Middle-school test scores tell us quite a lot. Students with high scores on reading, math, and science tests in 8th grade are dramatically more likely to earn a bachelor’s degree within five years of finishing high school. We analyzed nine years of data for 260,000 students in Missouri, starting with their 8th-grade scores and following them through high school and the next five years to see which students graduated high school, attended college, and earned a degree. We looked at each subject test separately and in combination, and we looked at students as a whole and grouped by race and gender. Every analysis found the same trend: The higher a student’s middle-school test scores, the more likely they are to graduate high school, attend college, and earn a college degree.

The differences are especially stark among students in the highest- and lowest-score categories. Fewer than 1 percent of students who score below basic in 8th-grade reading go on to earn a four-year college degree compared with almost 23 percent of students who score proficient and 43 percent of students with advanced scores. Put another way, the strongest readers in 8th grade are about 62 times more likely to earn a bachelor’s degree than the students with the lowest reading scores.

This piece on “Algebra Gatekeepers” from Janet Johnson and John Wittle is excellent. Key quote:

Every year, tens of thousands of students who could excel in advanced mathematics are relegated to standard courses that don't provide the pathway to calculus or Honors and Advanced Placement math in high school.

The solution starts with acknowledging that qualified students exist, admitting we're failing them, and then marshaling the resources to do better. The data is there. The technology exists. What's missing is the will to act.