What Is the Federal Tax Credit Voucher Program?

The Federal Tax Credit Voucher Program is a federal tax forgiveness scheme for wealthy taxpayers, cleverly disguised as an educational opportunity for low-income children. Its real purpose is to establish a nationwide voucher system that redirects public resources toward private and religious schools.

Originally introduced as a standalone legislation, the voucher bill was absorbed into H.R. 1, the federal Budget Reconciliation bill and is now federal law.

However, implementation is not automatic. The program requires state-level participation. Each governor must choose whether to opt their state in by submitting a list of approved Scholarship Granting Organizations (SGOs) to the US Treasury.

In states like Colorado, where voters have repeatedly rejected school voucher programs, this means that the decision now rests with the Governor, not the voters. For Colorado, the choice to activate the federal voucher program lies with Governor Jared Polis.

This is not a pilot program, a proposal, or a future possibility. The voucher scheme is federal law. Whether it takes effect in Colorado depends on a single decision made by the governor.

What Are School Vouchers?

School vouchers divert public education dollars away from neighborhood public schools and redirect them to subsidize tuition at private and religious institutions, usually in the form of “scholarships” offered by specific types of nonprofit organizations.

This new federal voucher law, scheduled to begin in January 2027, is expected to transfer billions of taxpayer dollars to private schools nationwide. For example, Ohio alone is spending approximately $1 billion this year on private school vouchers.

Opponents of vouchers believe taxpayers should have the right to vote on whether public funds are redirected in this way. Voucher supporters know something important, though. Not a single taxpayer-funded voucher program in the United States has ever been approved by voters. Every voucher program has been enacted by legislators, often under heavy pressure from well-funded pro-voucher lobbying groups.

How Does the Federal Voucher Program Benefit Wealthy Taxpayers?

• The voucher program allows taxpayers to reduce their federal tax bill by up to $1,700 by donating to an approved Scholarship Granting Organization.

• An SGO is a nonprofit that already provides private school scholarships and agrees to comply with the voucher program’s eligibility requirements.

• Most charitable donations generate tax credits of roughly 30%. Under the scheme, donors receive a 100% dollar-for-dollar federal tax credit.

• Because of this, tax advisors are expected to recommend SGO donations to wealthy clients regardless of whether they support vouchers. From a financial standpoint, it’s simply a good deal for them.

• SGOs are permitted to retain up to 10% of donated funds for “reasonable” administrative expenses.

Who Qualifies for a Private or Religious School Scholarship?

• Students whose family income is not greater than 300% of the area median gross income would be eligible to receive the scholarships.

• In some high-income counties, 300% of area median income can reach $500,000 for a family of four, underscoring that the program is not truly targeted to low-income students, despite how it is often marketed.

• Priority is also given to students who received a scholarship in the previous year and to their siblings, creating ongoing financial obligations.

• It remains unclear whether states will be required to cover funding shortfalls if donations decline while scholarship commitments continue to expand.

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Public education thrives when resources are invested equitably and transparently, not diverted through federal tax shelters that benefit the wealthy while undermining local schools. This is why A4PEP is committed to informing communities and advocating for policies that strengthen, not siphon from, public education.

More about this voucher scheme coming next week.

Please share with your neighbors, friends, principals, superintendents, and everyone who cares about public education.