Nearly two years since the election of Donald Trump to the presidency, it’s not just the proverbial D.C. “swamp” attempting to undermine his promises. Now it’s the Treasury Department run by his own appointee, Secretary Steven Mnuchin.
How else to explain a proposed regulation by the Internal Revenue Service issued last month that would potentially cripple successful state tax credit scholarship programs that help nearly 300,000 poor students attend a K-12 school of their parents’ choice?
The IRS has proposed new regulations to preclude states like New York, New Jersey, and Connecticut from using recently adopted tax credit schemes to enable taxpayers to get around the new annual ceiling of $10,000 on the amount state and local taxes that can be deducted from federal taxable income. This SALT limitation was part of the tax reform bill enacted by Congress last December. The state efforts to circumvent the law, whether one agrees with the SALT limit or not, are clearly shams, and Treasury has every right to block them.
But unfortuantely, this IRS regulation doesn’t stop there. It also adds a totally unrelated provision that takes aim at state-approved scholarship tax credit laws, all of which were adopted before the tax reform law and have nothing to do with the SALT controversy. If allowed to stand, the anti-school-choice provision would adversely affect schoolchildren throughout the nation who receive scholarships. Most of these children are African-American and Latino and are from low-income households.
This bureaucratic excess is more than harmful. It’s destructive to the lives and dreams of hundreds of thousands of disadvantaged children whose educational opportunities are now at risk from lost scholarship opportunities.
Perhaps the change was sloppy drafting. Whatever it is, the enthusiastic reaction of the national teachers unions to the anti-school-choice-language gives away what is really happening.
Eighteen governors over the past 20 years pushed through 23 state-level scholarship tax credit laws. This includes tax-credit programs in South Carolina, the home state of OMB Director Mick Mulvaney; Indiana, where the law was expanded by then-governor, now vice president, Mike Pence; Florida, where a program started by Jeb Bush has been protected and expanded by Gov. Rick Scott; Illinois, where Gov. Bruce Rauner fought a fierce battle to get that state’s law adopted over intense union opposition; and in Pennsylvania, where a program established by Gov. Tom Ridge, has been maintained and expanded by his Democratic successor, Ed Rendell, once the chairman of the Democratic National Committee.
Having lost those battles, the teachers unions, who supported Hillary Clinton over Trump, now have found an unlikely ally in Mnuchin. Rather than stopping the offensive school-choice-killing IRS regulations, Mnuchin has oddly defended the IRS making a major unlegislated tax change that never was intended by President Trump or anyone in the U.S. Congress when they adopted the tax reform law last December.
The theory behind state scholarship tax credit laws is simple. By increasing the tax incentive for charitable donations to nonprofit K-12 scholarship programs, more scholarship donations will result. This will give parents and children seeking the ability to attend a better school the wherewithal to do so financially. This is exactly what has happened throughout the country.
These scholarship tax credit programs have proven both successful and popular with parents and, correspondingly, they are feared and loathed by the teacher unions. The teachers unions are not fans of allowing captive students to choose schools whose teachers are not represented by their unions. The reaction of the teachers unions is not a surprise at all. What’s surprising is that a senior member of President Donald Trump’s cabinet us abetting them.
Candidate Trump promised in 2016 that he would be “the nation’s biggest cheerleader for school choice” and expressed a compelling vision that he “wants every single inner city child in America who is today trapped in a failing school to have the freedom – the civil right – to attend the school of their choice.”
Before it’s too late, Trump needs to place a phone call to his Treasury secretary, who is going in the opposite direction.
Peter Murphy is the vice president for policy at the Invest in Education Coalition.
