Summary

The Educational Choice for Children Act of 2025 (ECCA) would ostensibly provide a tax break on charitable donations to organizations that give out private K-12 school vouchers. Most of the so-called “contributions,” however, would be made by wealthy people solely for the tax savings, as those savings would typically be larger than their contributions.

ITEP estimates that ECCA would spur $126 billion in contributions to private school voucher funds over the next 10 years but would cost the U.S. Treasury more than that—$134 billion—because the tax subsidies being paid out would exceed the contributions made to these funds. Most states would automatically provide additional tax breaks on top of those offered by the federal government, bringing the total loss to public budgets to over $136 billion. In effect, ECCA seeks to harness wealthy families’ interest in tax avoidance and personal profit as a means of bolstering private schools at the expense of public budgets.

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Key Findings

• The Educational Choice for Children Act of 2025 (ECCA) would use the tax code to privilege nonprofit organizations that give out private K-12 school vouchers over nonprofits working on other issues, such as those supporting wounded veterans or victims of natural disasters. It would do this by reimbursing donors to voucher-bundling groups, in full, with an unprecedented dollar-for-dollar federal tax credit.
• In addition to the federal government covering the complete cost of the contributions to voucher-bundling groups, contributors would be able to reduce their taxes further by contributing corporate stock and avoiding capital gains tax. This would allow wealthy “donors” to turn a profit, at taxpayer expense, by acting as middlemen in steering federal funding into private K-12 schools. ECCA’s supporters appear to be counting on this tax shelter as a means of driving donor interest in the program even as vouchers remain unpopular with the public.
• The nation’s wealthiest families would enjoy substantial tax avoidance opportunities under ECCA. For example, if ECCA had been in effect a few years ago, voucher-proponents Betsy DeVos and Jeffrey Yass would likely have claimed annual tax credits of $11.2 million and $130 million per year, respectively. Capital gains tax avoidance would have come on top of these tax credits and could be expected to result in roughly $1.4 million of annual profit for DeVos and $13.3 million of annual profit for Yass.
• The centerpiece of ECCA is $10 billion in annual tax credits. The bill’s true cost is higher and would grow rapidly over time. We estimate that by 2035, the annual cost to federal and state coffers would be $17 billion. In total, ECCA would cost the federal government $134 billion in foregone revenue over the next 10 years and would cost states an additional $2.3 billion. This amounts to a combined loss to public revenue of $136.3 billion over the next decade.
• This money would flow from the public to three main groups of beneficiaries: private schools, voucher-bundling organizations, and wealthy donors. Eighty-five percent ($115.7 billion) of the foregone revenues would be converted into vouchers, 7 percent ($10.1 billion) would go toward the cost of administering these vouchers, and 8 percent ($10.5 billion) would flow to wealthy families as personal profit.

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Overview of the Tax Provisions in the ECCA

The Education Choice for Children Act of 2025 (ECCA) has been introduced in the U.S. House of Representatives as H.R. 833 and in the U.S. Senate as S. 292. The bill proposes a 100 percent tax credit—that is, a full reimbursement—for “donations” to nonprofits known as Scholarship Granting Organizations (SGOs). These SGOs are tasked with bundling the donations and converting them, primarily, into vouchers for free or reduced tuition at private K-12 schools.^[1]

The bill’s provision of a 100 percent tax credit is a sharp departure from how the federal government treats most types of contributions to nonprofit organizations. Typically, people contributing to nonprofits receive, at most, a tax deduction valued at 37 cents per dollar donated. Under this bill, “donors” to private K-12 school voucher funds would receive a tax break worth 100 cents per dollar donated—or roughly triple what they could receive by contributing to support wounded veterans, survivors of domestic violence, victims of natural disasters, or other nonprofit endeavors.

FIGURE 1

An overview of the path taken by these public dollars is provided in Figure 1. In short, the federal government would provide tax cuts to wealthy individuals and, in many cases, states would automatically pile on with additional tax cuts of their own. The people receiving these tax cuts would direct most of them to SGOs to fund private K-12 school vouchers, while retaining a portion for themselves as personal profit. And finally, the SGOs would direct most of the dollars they receive to private schools while retaining a portion for themselves to pay their employees and cover other administrative expenses.

Description of Capital Gains Tax Shelter

Contributions to SGOs under ECCA could take the form of either cash or marketable securities, such as corporate stock. In practice, the vast majority of contributions would be corporate stock because the tax subsidy for stock contributions is far larger than the subsidy for cash contributions.^[2]

In fact, the tax cuts tied to stock contributions are so large that contributors would generally find that “donating” would yield a personal profit for themselves. That is, the financial return from “donating” stock to SGOs would be larger than the financial return of selling the stock in exchange for cash.

This effect is illustrated with an example in Figure 2. In it, an individual who initially purchased stock for $6 million has seen it grow in value to $10 million, resulting in $4 million of profit. This $4 million return would ordinarily be considered long-term capital gains and subject to a federal income tax rate of 23.8 percent upon sale, resulting in a federal tax bill of $952,000. State taxes could add another $188,000 to that total, depending on the taxpayer’s state of residence.^[3] The total federal and state tax bill on this sale would therefore be $1.14 million.

Under the ECCA, a taxpayer in this situation would likely be advised by their accountant to forgo selling this stock in favor of contributing it to an SGO instead. Claiming an ECCA tax credit would result in the same pre-tax return as selling the stock (receipt of a $10 million tax credit rather than a $10 million cash payout). But it would not incur the $1.14 million income tax bill described above and depicted in Figure 2. This taxpayer therefore sees a higher after-tax return, or profit, from choosing to give away their stock under ECCA rather than sell their stock.

FIGURE 2

The tax structure envisioned under ECCA is a classic example of a “tax shelter,” as it would attract not just people who care deeply about funding private K-12 school vouchers, but also opportunists who would participate solely for the tax savings.^[4] There is a long history of private schools and financial advisors advertising various kinds of tax shelters hidden in state-level tax credits similar to ECCA.^[5]

Up until a few months ago, ECCA supporters might have been forgiven for proposing such an egregious tax shelter on the grounds that, perhaps, they were simply unaware of what they were suggesting. They lost all claim to plausible deniability last fall, however, when Republicans on the U.S. House Ways and Means Committee voted along party lines against a technical correction from Rep. Mike Thompson that would have stripped this tax shelter from the bill while leaving the tax credits and the rest of the legislation intact.^[6] Apparently, the bill’s supporters are counting on harnessing this tax shelter as a powerful incentive to fuel their efforts at school privatization.^[7]

Illustrating ECCA’s Impact for Prominent Voucher Proponents

Enacting ECCA would almost certainly inspire a flood of donations of corporate stock not just by people who support private school vouchers, but also by wealthy people who are merely acting on the advice of their financial advisors. Nevertheless, wealthy people with a genuine interest in school privatization are almost certain to be among the most enthusiastic ECCA tax credit claimants.

To illustrate the tax impacts of the ECCA more clearly, we compute the bill’s likely effects for seven wealthy individuals who have gone on the record as supporting public funding of private school vouchers, and are therefore extremely likely to claim ECCA tax credits if they are enacted.^[8] The analysis presented in Figure 3 combines IRS tax data reported by ProPublica with IRS statistical data to estimate the approximate tax cuts that wealthy voucher proponents could have received each year if ECCA were in effect from 2013 to 2018 (the years of data reported by ProPublica).^[9]

FIGURE 3

We estimate that if this proposal had been in effect during those years, Betsy DeVos would have claimed a tax credit of $11.2 million per year and Jeffrey Yass would have claimed $130 million per year. Capital gains tax savings would have come on top of these tax credit amounts and could be expected to result in a $1.4 million annual profit for DeVos and a $13.3 million annual profit for Yass.

Altogether, the seven individuals examined here would have received $283.9 million in tax cuts per year. Of that amount, $256.2 million would be reimbursement, in full, for their contributions to SGOs while the other $27.7 million would be personal profit in the form of capital gains tax avoidance.

It bears noting that the assumptions used to arrive at these estimates may underestimate the tax cuts these individuals could expect under ECCA.^[10] Most notably, the tax cuts afforded to them today would likely be larger than is shown here simply because the wealth, and likely the income, of most of these individuals has grown substantially since the period covered by the ProPublica reporting.^[11] Elon Musk’s overall wealth, for example, was 21 times higher in 2024 than it was in 2016, according to estimates by Forbes.^[12]

Actual tax credit claims are also likely to vary significantly across years, as the taxable incomes of wealthy people fluctuate based on when they decide to sell their investment holdings. In 2018, for example, Elon Musk would likely have been ineligible to claim ECCA credits, based on reporting by ProPublica that he paid no federal income tax that year.^[13] In 2021, on the other hand, Musk could potentially have claimed $2.9 billion in ECCA credits, or nearly 30 percent of the total amount available nationwide.^[14] A claim of that magnitude could have allowed Musk to avoid $690 million in federal personal income tax on his capital gains income.

Federal and State Revenue Effects

While the centerpiece of ECCA is $10 billion in annual tax credits, the bill’s true cost is higher and would grow quickly over time.

As described above, for instance, ECCA would facilitate avoidance of both federal and state capital gains taxes. That tax avoidance would result in additional revenue loss beyond the tax credits being provided.

ECCA also contains an escalator clause that would allow the amount of federal tax credits to automatically rise by 5 percent in any year where a large share (at least 90 percent) of the previous year’s credits were claimed. Given the lucrative nature of the capital gains tax shelter embedded in ECCA, it is virtually guaranteed that the entirety of available credits would be claimed each year and that this escalator provision would be repeatedly triggered.

Experience has shown that tax avoidance opportunities of the type contained in ECCA attract significant interest. In 2018, for example, a change in federal law ramped up the profitability of a tax shelter facilitated by a voucher tax credit in Arizona. Afterwards, taxpayers who had previously taken six months to claim the full allotment of state tax credits rushed to do so in just two minutes.^[15] ECCA contains a similar “first-come, first-served” application process to ration what is sure to be a highly sought-after tax shelter.

Proponents of ECCA would likely cite a rapid claims process as evidence that vouchers are popular among taxpayers—despite their poor track record at the ballot box.^[16] The reality, however, is that much of the enthusiasm among credit claimants would be driven by the personal self-interest of contributors seeking to exploit a profitable tax shelter.

We estimate that by 2035, the annual cost of ECCA to federal and state coffers would be $17 billion.^[17] By that time, just under 9 percent (or $1.5 billion) of the annual tax cuts facilitated by the bill would take the form of capital gains tax avoidance, with the other 91 percent resulting from the ECCA credits.

FIGURE 4

In total, ECCA would cost the federal government $134 billion in foregone revenue over the next 10 years and would cost states an additional $2.3 billion over that same period. This amounts to a combined loss to public coffers of $136.3 billion over the next decade. A detailed accounting of these effects, by year, is available in Appendix Table B. Results by state can be found in Appendix Table C.

Flow of Public Dollars into Private Schools

The convoluted nature of ECCA, involving transfers to and from at least five different actors (see Figure 1 earlier in this report), can make it difficult for interested parties to understand how the program would work in practice. Figure 5 sheds light on this question by showing how the tax policy aspects of ECCA would affect the budgetary or financial standing of the federal government, state governments, contributors, SGOs, and private schools. Clearly, the principal effect of ECCA is a significant transfer of public funds from the federal government into private K-12 schools.

Over the next decade, ECCA would move $134 billion out of federal coffers and an additional $2.3 billion out of state government coffers. Most of this movement (92 percent) is comprised of the ECCA credits but capital gains tax avoidance contributes 8 percent to this loss of funding as well. The combined federal and state effect would be a loss to public coffers of $136.3 billion over the next decade.

FIGURE 5

This expense to public budgets would flow to three main groups of beneficiaries: private schools, voucher-bundling organizations (SGOs), and wealthy contributors to those SGOs. Eighty-five percent (or $115.7 billion) of the foregone revenues would be converted into vouchers. Seven percent (or $10.1 billion) would go toward the cost of administering these vouchers.^[18] And 8 percent (or $10.5 billion) would flow to wealthy families as capital gains tax avoidance.

Put a different way, ITEP estimates that ECCA would spur $126 billion in contributions to private school vouchers funds over the next 10 years but would cost the U.S. Treasury more than that—$134 billion—because the tax subsidies being paid out would exceed the contributions made to these funds. Most states would automatically provide additional tax breaks on top of those offered by the federal government, bringing the total loss to public budgets to $136.3 billion.

A more detailed, annual accounting of these figures can be found in Appendix Table B for the federal and state governments, and in Appendix Table D for contributors, SGOs, and private K-12 schools.

Conclusion

The Educational Choice for Children Act of 2025 (ECCA) would create an unprecedented dollar-for-dollar federal tax credit for people who contribute to voucher-bundling groups. The bill would privilege funding private K-12 school education over contributions to any other cause, such as supporting wounded veterans, survivors of domestic violence, or people reeling from natural disasters. In addition to offering these large tax credits, the bill would also open a new tax shelter that wealthy investors would use to avoid capital gains tax. In effect, the bill sponsors are proposing to wield the opportunity for tax avoidance to motivate wealthy families to act as middlemen in moving public funds into private schools. The result would be a significant loss to public revenues, estimated at over $136 billion over the next decade.

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Appendix: Additional Data Tables

• Appendix Table A: Estimated Annual Tax Cuts from ECCA, if it Were in Effect Between 2013 and 2018, for Select Individuals
• Appendix Table B: Estimated Change in Federal and State Government Revenue Under ECCA of 2025
• Appendix Table C: State Revenue Loss from Capital Gains Tax Avoidance Facilitated by ECCA of 2025
• Appendix Table D: Estimated Change in Financial Position of Actors Benefiting from ECCA of 2025

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Endnotes

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