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Over the years, Joshua Raymond has paid for a variety of “extras” for his three daughters in public schools, from tutoring to band instruments to SAT prep. If Michigan opts into the federal scholarship tax credit program, he believes the state could offset some of those costs for parents.
The new federal tax credit reimburses taxpayers for donations to scholarship-granting organizations, which then distribute money to families for a range of educational expenses, including private school tuition. Public schools could create their own organizations to help families pay some out-of-pocket expenses, such as after-school enrichment programs, summer school, and field trips.
“There were so many things we had to pay for that were not covered by the school,” said Raymond, who has had two daughters attend Rochester Community School District, while a third is a senior. “There were educational and academic opportunities we turned down (due) to cost.
“This is (one of) the largest federal investments in education ever. If Michigan spurns it, we risk falling further behind other states in education.”
The federal scholarship tax credit, which was primarily designed to benefit private school families by offering a public subsidy for tuition, has drawn comparisons to universal voucher programs enacted in states like Arizona and Texas. But some supporters point to an important difference and potential opportunity: The federal scholarship tax credit could be used by public school families.
But as Michigan weighs whether to participate, there are still a lot of unknowns, including what expenses scholarships can actually cover and whether private schools are better positioned to take advantage of the program.
Families earning up to 300% of area median income are eligible to receive scholarships for their children. The federal scholarship tax credit allows individual taxpayers to get reimbursed up to $1,700, or up to $3,400 for married couples filing jointly. The donations are reimbursed as a credit when donors file their federal taxes.
While 31 states have opted in to the program, Michigan is one of 19 states that have not yet made a decision for the coming year. Gov. Gretchen Whitmer’s administration said it is reviewing the new rules the Treasury Department issued on Oct. 1. States have until Jan. 1 to opt in to be eligible to receive funding from the program when it begins in 2027.
New York Gov. Kathy Hochul announced Friday she would opt that state into the program, despite opposition from teacher unions, after saying earlier this year that she was waiting for the rules to be released before taking that step.
Michigan gubernatorial candidates, Democrat Jocelyn Benson and Republican John James, have opposing views on the tax credit program. James’ campaign pledges to opt in on “day one,” while Benson opposes it.
“Nearly 1.5 million Michigan kids could be eligible to benefit from this program, giving families access to additional resources for tutoring, after-school programs, special-needs services, educational materials, scholarships and other opportunities that help students succeed,” James’ campaign spokesperson Alyvia Bailey said.
Benson said committing to the Trump administration’s tax program would be “reckless and irresponsible” as there is still a lack of clear guidance for how it will be implemented.
“I’m open to any policy that gets more resources into our schools,” Benson said. “But let’s be clear: Donald Trump is not being transparent about where the money from this program will go or how it will improve educational outcomes. As governor, I can’t commit taxpayer dollars to a program under Trump’s control with zero transparency or assurance it will deliver for Michigan students.”
The case for Michigan to opt into the federal scholarship tax credit
Josh Cowen, a voucher critic and Michigan State University education researcher, said the federal scholarship tax credit differs from state voucher systems.
Typical state voucher systems do not allow public schools to be providers, he said, and students must exit public schools to be eligible. With the federal credit, the opposite is true.
If public schools create nonprofit scholarship-granting organizations, Cowen anticipates they will be able to pay for things like after-school enrichment, tutoring, summer school, and to a smaller extent arts and music.
“The opportunity in the credit is real for public schools, but they’ve got to start moving,” he said. “Money is not just going to come to them automatically.”
Georgetown University school finance expert Marguerite Roza previously suggested that public schools could create a fixed package of services for what she calls the K12 Plus Plan, charging a fee – that would be covered by scholarships – to give students access to things like field trips, devices, Advanced Placement classes, after-school care, electives, and in-school tutoring.
But after the Treasury Department’s latest release of proposed regulations, Roza said what will ultimately be allowed for public schools “could get messy.” Roza, who noted that the department’s guidance isn’t binding, believes any expense covered by tuition for private schools should be allowed for public schools.
“Public school districts don’t love ambiguity,” she said. “I know that the government moves slowly, but these delays are actually contributing, in my opinion, to what will be a slower start than would be if we had better information sooner.”
Roza also worries that income verification requirements could make it much harder for public schools to realize the benefits.
She suggested that state leaders who have reservations could opt in for the first year of the program and then opt out the following year if the difference between what is allowed for public and private schools is a “disaster.”
Critics question who would benefit from federal tax credit
Michigan doesn’t have a school voucher or tax credit program, and its Constitution bans public money or tax benefits from going to any private, denominational, or other non-public school.
On two occasions, 1970 and 2000, Michigan voters rejected public funds going to non-public schools. In 2023, a federal lawsuit unsuccessfully challenged the state’s Constitution.
Cowen believes Michigan could participate in the scholarship program because it involves federal dollars, adding he sees “no problem with the state Constitution.”
Some critics of the new tax credit, however, have concerns about who will benefit from the program.
In May, Michigan’s State Board of Education passed a resolution opposing the state’s participation in the tax credit program, saying federal education policy should focus on strengthening public schools.
Pamela Pugh, president of the state board, said that instead of providing a tax credit, the federal government should fully fund its 40% share of the Individuals with Disabilities Education Act, something states have been “waiting decades” for.
Pugh also argued that private schools already have infrastructure to work with scholarship-granting organizations, while many public schools don’t have existing local foundations to award scholarships.
“We also are not expecting to have control over how those donations are geared and who they’re geared toward,” Pugh said. “What we do know is that there is a lot of ambiguity. There’s a lot of unknowns.”
Beyond the potential administrative hurdles public schools face, Michigan Education Justice Coalition Co-Director Rachelle Crow-Hercher also said vouchers have an ugly history, dating back to the 1950s with state-created tuition grants, which allowed white students in the South to pay for private school after Brown v. Board of Education ended legally mandated racial segregation.
“There are other things we could be spending the money on, and that we should be spending the money on, rather than a system that was created for segregating schools,” she said.
Michigan Association of Non-public Schools Executive Director Brian Broderick said the federal scholarship tax credit is “maybe a bigger deal” in Michigan than in other states that already have universal voucher programs. The organization has been pushing the governor’s office to opt in for several months, with private school advocates speaking out in favor during the state board’s May 12 meeting.
Blocking Michigan’s public and private schools from having access to these donations, Broderick said, could divert funding to other states.
“I think we’ll be at a real loss here in the state if we do not participate in the program because there’s so much potential new funding that can come to serve students in Michigan,” he said.
Raymond, the father of three in Rochester, said he would like to make a donation to a scholarship-granting organization in Michigan. But if he can’t, he plans to make one to benefit his nieces and nephews – in Utah, a state that opted into the program.
This story is part of a collaboration between Chalkbeat Detroit and the Detroit Free Press on covering key education issues in the race for Michigan’s next governor.
