Beginning in 2027, taxpayers may claim a federal tax credit of up to $1,700 ($3,400 for married couples filing jointly, under the Treasury Department’s proposed regulations) for contributions to scholarship-granting organizations (SGOs) in participating states. Many families we serve will be affected by this program, and many organizations we work alongside will be deciding whether to participate. What follows is how Education Independence thinks about the Federal Scholarship Tax Credit, also marketed as the Education Freedom Tax Credit, and why.
Our posture is simple. We support families. We examine mechanisms. Our concern is with the structure the credit creates and the relationship it builds between government and private education.
We want to be clear and direct, without exaggeration. Our aim is to describe how the program actually works, explain why it matters for freedom, and keep our eyes fixed on the ideal even as we live in the reality of compromise.
1. Sending Less Money to the Federal Government Is a Good Thing
Fewer dollars passing through the government is a welcome outcome. Money that goes to a scholarship instead of the Treasury is money the federal government cannot spend. Still, redirecting a tax payment is not the same as the freedom of keeping it. Less money sent to the federal government should not be mistaken for more financial freedom.
2. Compulsion Is Not the Path to Freedom
With a dollar-for-dollar credit, the taxpayer’s total required payment does not change. Whether they donate or not, the same amount leaves their household. The only thing the credit changes is where it goes. If keeping the money was never an option, the financial extraction is still compulsory.
The choice is not between giving and keeping; it is between paying the government and paying a government-approved organization. That is not voluntary generosity. It is a redirected tax liability, shaped by government approval, eligibility rules, and incentives.
An economy of freedom allows families, communities, and the private and charitable sector to meet needs voluntarily. An economy of force relies on compulsion to achieve outcomes, even good ones. Families will be helped by this credit, but it is still fair to ask which economy the credit strengthens. Good intentions do not change the nature of a coercive mechanism.
3. History Offers a Record, Not a Recommendation
Public-private partnerships are not new. Governments have long used private organizations to deliver services, distribute funds, and, at times, to pursue aims they lack the jurisdiction to accomplish directly. That history gives us something better than speculation: a record. We do not need to predict what might happen when government and private organizations become intertwined. We can look at what has already happened and ask whether this arrangement is likely to be different.
Some argue that the SGO framework is similar to the 501(c)(3) framework. The difference matters: a charitable deduction reduces taxable income, while a dollar-for-dollar credit replaces the tax owed itself. Before we eagerly participate in this model, we should ask whether these entanglements have expanded freedom or curtailed it. Having done something before does not make it ideal, and it is not a reason to build further on that precedent.
Minnesota offers a recent illustration. Its Child Care Assistance Program routes public funds through private providers, and the state now has more than fifty open investigations into those providers. The comparison is not exact, because those providers received appropriated funds rather than tax-credit contributions. Still, tax credits are classified as tax expenditures for good reason. When government defines eligibility and approves participants, and large amounts of money are in play, fraud and misuse are rarely far behind. The public often demands more accountability in response, inviting the government to step in and take more control.
4. Where Money Flows, Influence Follows
History and human nature both teach that where money flows, influence follows. When government decides which organizations qualify, sets the rules they must follow, and facilitates the incentive that funds them, it gains influence over those organizations whether or not it intends to. Over time, lines of accountability blur, and the government can shape through private partners what it could not direct on its own. None of this requires bad actors. The integrated structure lends itself to predictable patterns. One administration may administer a program in ways families welcome, but administrations change regularly. A future administration can revise this program’s regulations, guidance, and enforcement priorities without a vote of Congress. That is why it matters who holds influence and jurisdiction in this arrangement before anyone builds upon it. God-given liberty should not depend on the outcome of the next election.
Foreign aid shows how government can shape through private partners what it could not direct on its own. For decades, the United States Agency for International Development (USAID) funded private nonprofits to carry out election and civic programs abroad, including a consortium that received nearly half a billion dollars in grants for electoral work. Whatever one thinks of the goals, the structure allowed the federal government to shape political processes in other nations through organizations that appeared independent. Foreign governments have objected for years precisely because the line between private charity and government influence was so difficult to see.
5. Federal Tax Policy Joins What Should Stay Apart
This is not separation; this is integration. Education independence depends on clear boundaries between families and the state, between what is public and what is private. A program in which government approves the organizations, defines eligibility, and facilitates the funding does not keep those spheres apart. It joins them. Under the Treasury’s proposed regulations, participating organizations must register through an Internal Revenue Service (IRS) portal, assign donor numbers in a federal format, and report contribution information to the IRS. Integration may be well-intentioned, and it may help families in the short term. Still, once private education is woven into federal tax policy, untangling it becomes far harder than declining to enter it.
6. Government Can Leverage Dependency
Dependency should be approached with caution. The concern is both for the family that receives a scholarship and for the institution that builds its budget around one. A family that retains the fruits of its own labor is better positioned to pursue independence than one that comes to depend on an infrastructure of qualifications and approvals.
A school or ministry that relies on federally incentivized dollars may grow reluctant to question the rules that come with them, and vulnerable when those rules change. Independence is easier to keep than to recover. Institutions that stay free of the arrangement remain free to speak about it.
7. There Is a Better Way
The Federal Scholarship Tax Credit is here, and families and organizations must make decisions in the current context. Still, the ideal should remain in view. Independence is a better way. Families flourish when they keep more of what they earn, which is the value they produce, without approvals or eligibility rules attached. Communities flourish when neighbors, churches, and the private and charitable sector meet needs freely, without needing a government list or incentive to make their generosity count. The better way is not a more carefully designed program. It is a world that no longer needs one: lower taxes for every family and a charitable sector that answers to conscience rather than to policy.
Conclusion
We offer these principles not as a verdict on any family or organization but as a way of thinking clearly about the choices before us. Families will weigh this credit in light of their own circumstances, and we respect that. Our hope is that every decision is made with open eyes, and that none of us mistakes a good outcome for a good mechanism. Freedom is worth the effort of examining the machinery we build to pursue it.
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