The Senate has seen a new, high-profile bill aimed at reversing a recently enacted federal tax incentive for school choice. Senator Mark Kelly and 29 fellow Democrats introduced the Keep Public Funds in Public Schools Act, which would repeal the Education Freedom Tax Credit (EFTC) before it can take effect. Backers of the repeal frame the measure as a defense of public education budgets and an effort to prevent private scholarship funds from siphoning public resources, while advocates of the credit call it a mechanism to unlock private scholarships and expand options for families.
The EFTC is notable as the first federal policy designed to encourage charitable donations for student scholarships nationwide: it offers a dollar-for-dollar tax credit of up to $1,700 for individual contributions to scholarship granting organizations. The Joint Committee on Taxation estimated a $25.9 billion revenue impact over ten years. The credit is scheduled to begin in 2027, and so far 29 states have indicated they will opt into the program and complete administrative steps so that SGOs can distribute scholarships to eligible students.
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What the repeal would change
If enacted, the proposed legislation would remove the statutory basis for the credit by striking Section 25F of the Internal Revenue Code and eliminating the related income exclusion under Section 139K. The repeal language is written to be effective for taxable years ending after December 31, 2026, which would prevent the EFTC from operating when it was scheduled to begin. The measure is cosponsored by a group of senators that includes well-known figures such as Bernie Sanders, Chuck Schumer, Elizabeth Warren, and John Fetterman, and it has gathered endorsements from about 163 national and state organizations that say the credit risks diverting public resources away from traditional public schools.
Arguments from both sides
Supporters of repeal
Proponents of the repeal argue that the federal credit effectively creates a national voucher-like program that undermines public school funding and accountability. They point to past problems in state-level scholarship and education savings programs as cautionary examples; for instance, critics cited reports from Arizona’s program alleging misuse of public funds on disallowed items like gift cards and luxury lodging. Supporters emphasize stewardship of taxpayer dollars and contend that public schools should remain the primary focus of government education investment rather than being reshaped by tax incentives aimed at private giving.
Opponents of repeal
Opponents counter that the EFTC is funded by private donations and therefore does not directly reduce state education budgets, while potentially unlocking billions in philanthropic scholarships for families. Groups such as the American Federation for Children argue the credit empowers parents to direct educational resources and widens access to tutoring, special services, technology, and alternative tuition options. AFC leaders have called the repeal effort “misguided,” noting that multiple states have already moved to participate and that supporters view the program as a durable expansion of school choice.
Political outlook and practical steps for families
Legislatively, the repeal faces long odds because Republicans control both chambers of Congress, but advocates say the fight is likely to continue during budget negotiations and other appropriation battles where lawmakers could try to limit funding or impose caps. For families and local organizations, the immediate practical considerations remain state-level: eligible students are those from households earning up to 300% of the area median gross income, and participation depends on states completing required administrative actions to authorize SGOs before the EFTC’s implementation. Those monitoring the debate should watch state opt-in decisions, SGO approval processes, and any regulatory guidance that clarifies how scholarships may be used.
Whether the repeal gains traction or not, the episode highlights how education policy and tax policy intersect and why the EFTC has become a national flashpoint. Families in the states that have signaled participation should stay informed about eligibility rules, SGO outreach and approval timelines, and any congressional or state-level moves that could change how the program operates before scholarship dollars begin to flow.
