Following years of pandemic-related disruptions in public schools, declining test scores, and chronic absenteeism, the parental empowerment movement achieved a significant breakthrough in 2023 with a historic surge in school choice. Now, Congress aims to build on this momentum in 2024 by introducing the Achieving Choice in Education (ACE) Act, which seeks to double tax savings for parents exploring educational alternatives for their children while restricting tax breaks for states opposing school choice.
The proposed legislation creates a clear choice for states: either empower parents or risk losing federal tax advantages. While this decision might seem straightforward, numerous states are impeding reforms that would enhance accessibility to private, charter, religious, and homeschooling alternatives. Illinois notably reversed its school choice program after a six-year run, becoming the first state to fully dismantle such a initiative.
Recent legal challenges in Wisconsin aimed to terminate the country’s longest-running school choice program, and a Nebraska organization triggered a ballot initiative to roll back the recent expansion of school choice. Despite nine Republican-led states embracing universal school choice, 22 Republican trifectas, including Texas, remain prepared for further expansion. Conversely, states governed by Democrats are either blocking expansion or contemplating a rollback of existing choice programs.
The ACE Act, introduced by Republican Missouri Rep. Eric Burlison in the House and GOP Utah Sen. Mike Lee in the Senate, incentivizes states to remove barriers to additional learning options. It achieves this by expanding the list of K-12 expenses eligible for funding through a 529 savings account, offering substantial tax incentives for states embracing school choice policies. The 529 savings account allows families to save for K-12 education tax-free, with the ACE Act expanding allowable expenses to include homeschooling costs, raising withdrawal limits, and providing gift tax exclusions for 529 account contributions without double taxation.
The legislation empowers families with students in public, private, religious, and at-home schools to allocate their hard-earned savings to various educational expenses, including curriculum materials, books, online resources, tutoring, testing, therapies for students with disabilities, and tuition.
Recognizing the disruptive impact of the pandemic on education, the ACE Act prioritizes individual learner empowerment, offering control and flexibility to families. Additionally, it incentivizes states to adopt more school choice policies by linking federal tax perks to the implementation of such programs. Under the proposed act, states failing to implement school choice policies risk losing tax exemption on municipal bonds used for local projects, including school construction.
While these bonds’ interest income is currently untaxed at the federal level, the ACE Act threatens to eliminate these tax perks for states failing to prioritize school choice. For states with insufficient school choice laws, the federal government would offer a 50 percent tax break on municipal bond interest income as an incentive to move in the right direction.
The potential loss of approximately $380 billion in interest income over the next decade serves as a significant motivator for representatives to remove barriers to school choice. The proposed legislation builds upon previous efforts, with Republicans opening 529 plans to include K-12 costs in 2017. The ACE Act seeks to double the annual spending limit from $10,000 to $20,000, reinforcing Senator Lee’s belief that it is a “fundamental right” for parents to direct their children’s education. Passing the ACE Act represents a crucial step toward ensuring every child receives an education tailored to their needs, with consequences for governments hindering this opportunity.
