One of the final amendments to the tax bill passed by Congress was the Student Opportunity Amendment introduced by Texas Sen. Ted Cruz. It will subsidize students attending private K-12 schools.
School choice advocates often use the language of equity, arguing that private school choice programs merely offer poor, segregated families the options that wealthier families take for granted. Cruz played the equity card in promoting the Student Opportunity Amendment, claiming that it will would “help working class and middle-income families” and ensure “that each child receives an education that meets their individual needs, instead of being…limited to their zip code.”
Some school choice programs really are designed to help lower-income families. But the Student Opportunity Amendment is not. Instead, it will mainly help wealthier families who can already afford private school.
The measure proposes to let families pay for private K-12 schools with tax-advantaged “529 investment accounts,” which until now could only be used for college and graduate school.
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These 529 accounts are rare among working class families. A 2012 report by the Government Accountability Office found that only 6 percent of families with children at home had 529 accounts. Those families had median incomes of $142,400 and median assets of $413,500. That’s three times the median income and 25 times the median assets of other families.
Even among families with 529 accounts, few will get much benefit from the amendment. In 2012, the median balance in a 529 account was just $14,700—just one to two years’ tuition at a private elementary or secondary school. Few families will withdraw that money to pay for private school. They’re going to save it for college.
And they really should. The 529 accounts aren’t designed to cover short-term education expenses; they’re designed to encourage long-term saving for college. The main benefit of a 529 account is that you don’t have to pay federal taxes on investment gains inside of it. The longer you wait, the larger those untaxed gains are likely to be. You benefit more by waiting for college than by withdrawing the money for private elementary school.
The president of EdChoice, an advocate for private school choice, has suggested another use for 529 accounts. At tuition time, he suggests, a family could deposit, say, $10,000 in a 529 account and then withdraw it immediately to pay their child’s school. This could save a few hundred dollars if the family lives in one of the 35 states that credit or deduct 529 contributions from state income taxes. It wouldn’t work in Texas, which has no state income tax, and it only works for families that have $10,000 in the first place.
If Congress wants to make private schooling more equitable, it should present a serious proposal to help poor families attend private schools. It shouldn’t use the language of equity to promote a plan that helps only the rich.
Paul von Hippel is an Associate Professor at the University of Texas, LBJ School of Public Affairs, where he teaches courses on education policy and the evaluation of public programs.