Editor’s note: The future of Cruz’s amendment for a private school savings plan in the tax bill is now uncertain. The House this morning approved a conference committee report that included the Cruz plan, but late this afternoon House Majority Leader Kevin McCarthy announced that the Cruz amendment violated a Senate procedural rule. However, a Capitol source told Texas Monthly that only the homeschool provision would have to be removed to conform to Senate rules. The Senate tonight will vote on the Cruz amendment, and the bill will go back to the House for further action on Wednesday.
Update: The Senate did, in fact, vote to remove the piece of the Cruz amendment that extended college savings plans to homeschool programs. His private school provision will stay.
In the congressional debate over restructuring federal taxes, U.S. Senator Ted Cruz managed to do something that Governor Greg Abbott and Lieutenant Governor Dan Patrick could not do during this year’s state legislative session: pass legislation that makes it easier for parents to pay for private schools or cover homeschooling expenses.
If the Senate tax bill eventually becomes law, the Cruz amendment would expand the tax-exempt college savings account—known as a 529 because of its location in the tax code—to cover up to $10,000 a year in tuition or expenses for elementary and secondary education in private schools or for homeschooling.
The average private school elementary tuition in Texas, for example, is $6,836 a year, and the average private high school education costs $10,462, according to the Private School Review. The group also reports that 304,456 students are educated at 1,782 private schools in Texas. Sixty-two percent of those schools are affiliated with a religion.
Single taxpayers can contribute up to $14,000 a year to a 529 plan, and married couples can invest up to $28,000. Utilizing such a plan might make sense for middle and upper-income families but could be an impossible struggle for the working poor. That’s why some supporters of private school vouchers support direct government funding, which opponents complain would divert money from the public schools.
During this year’s state legislative session, Abbott and Patrick supported a school voucher program that would have set up education savings accounts to pay for private school tuition for economically disadvantaged students. But the savings accounts in that plan would have just been a pass-through of an estimated $3.4 billion taken from public schools and given to parents for use at private schools. The measure died in the House without a vote.
Cruz’s plan is different, though, because it is just a matter of the federal government foregoing the revenue. In the future, that either increases the national debt or results in automatic federal budget cuts under arcane rules called pay-as-you-go, or Paygo.
Education advocacy groups, not surprisingly, opposed the Cruz amendment as a first step toward private school vouchers that might undermine the public education system. But the legislation also received opposition from some conservative groups, such as the American Enterprise Institute, for falling short of President Trump’s promise to put $20 billion of federal funds into private school choice.
An AEI report said the amendment does little to help underprivileged families put their children in private schools and added that the overall value of a 529 account is diminished if funds are withdrawn early to pay for private high school instead of being saved for college. “The parents who will benefit most from these changes are those who already send their children to private schools or have access to tax advisors to help them plan their savings,” the report said. “If Congress really wishes to advance the administration’s stated goals on school choice, it would do better to scrap these reforms to 529 plans and come up with a different proposal.”
Cruz’s main Republican primary opponents questioned whether his amendment is a meaningful part of a true tax reform.
“While I agree with Sen. Ted Cruz that parents should be able to utilize their 529 plan savings on K-12 education expenses—for public schools, private schools, religious schools and homeschooling—the bigger concern regarding tax reform is whether Ted is currently vying for the best interest of the citizens of Texas,” said Bruce Jacobson, a Christian television executive challenging Cruz in the Republican primary. Jacobson said Cruz had promised to simplify the tax code.
Houston energy lawyer Stefano de Stefano, another Cruz challenger, said, “Personally, I love Ted’s amendment because it helps family’s like Ted’s and mine, along with other rich people whose kids already don’t go to public schools. But the reality is that this amendment is a transfer of wealth from the public purse—tax dollars that fund public education—to private schools, many of which will be religious institutions. If Ted wants to transfer money from public schools to Imams, Synagogues and the Vatican, fine, but let’s not pretend this benefits the majority of Texans.”
El Paso congressman Beto O’Rourke, Cruz’s likely Democratic opponent, said the amendment is just part of a larger tax cut that will harm average Americans. “This tax bill hurts public education in Texas and across the country,” he said. Republicans “add $1.5 trillion to the debt with no doubt in my mind that they’ll soon come back and demand cuts to education and services middle class families rely on to pay for that new debt. Now, they’re lifting private schools up with the Cruz amendment while leaving public schools behind.”
Congress is expected to take a final vote on the tax overhaul bill before Christmas.