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PODCAST: “Freedom to Learn” | John Schilling on the New Federal School Choice Tax Credit, Rulemaking Realities, & the Future of School Choice

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On July 4, 2025, President Trump signed the One Big Beautiful Bill Act, embedding a 100% non-refundable federal scholarship tax credit—permanent and uncapped—into the federal tax code. In today’s Freedom to Learn podcast episode, I spoke with John Schilling, a seasoned education freedom advocate, about the tax credit’s potential, its challenges, and its role in empowering families nationwide.

“We just want parents to be in the driver’s seat so that they can choose the best educational options for their own kids.” – John Schilling

The federal scholarship tax credit allows individuals to donate up to $1,700 to scholarship granting organizations (SGOs), receiving a dollar-for-dollar tax credit. SGOs award scholarships to families earning up to 300% of the area median income (covering 85–90% of K-12 students) for expenses like tuition, tutoring, special needs services, and educational materials, per Coverdell account provisions (Section 530b).

John celebrated the school choice milestone — “Getting this embedded in the tax code was a huge win for us.” — while noting the provision’s limitations. Check out a slightly abridged and edited transcript of our conversation below, or listen to the full episode on Apple, Spotify, or YouTube.

Abridged Transcript: John Schilling on the Federal Scholarship Tax Credit

We met years ago while working on the DC Opportunity Scholarship Program. And now we have a new federal school choice option that is of a very different scope. The One Big Beautiful Bill Act, which the president signed on July 4th, included a scholarship tax credit. Tell us what this means.

John Schilling: The big win in the One Big Beautiful Bill Act for school choice supporters is this 100% non-refundable federal scholarship tax credit that is permanent and uncapped. We are really excited about this.

The very first federal scholarship tax credit was introduced by then-Senator Marco Rubio in 2013. But we never really got traction on this until Betsy DeVos became Secretary of Education. And the work that Betsy and her team did in the first Trump administration to lay the groundwork for this, and indeed the work and the support that she and her team continued to provide throughout this process, was absolutely crucial to getting it done.

Let’s talk about how the sausage was made.

We went through a very interesting process. The Educational Choice for Children Act was the original bill that was introduced in June 2022. The sponsors of that bill were Senator Bill Cassidy and Senator Tim Scott. Over on the House side, the bill was picked up by Congressman Adrian Smith, who was a senior member of the Ways and Means Committee, aided brilliantly by Congressman Burgess Owens of Utah, who has just been a tremendous champion on this all the way through.

Just about a month or so ago, Senator Ted Cruz introduced something called the Universal School Choice Act, which made two substantial changes to the ECCA. And those changes were to make it universal with a means preference, very similar to what was passed in Texas earlier this year, and to change the allocation formula from what was first-come, first-served to a formula that was based on the K-12 population in every state.

In the end, it sort of morphed into its own thing, thanks to the Senate parliamentarian more than anybody else.

Not the most popular person in Washington, DC right now.

It’s an odd process. A reconciliation bill can happen anytime one party controls the White House, the House, and the Senate. So both parties have used this tool. Biden used it twice to pass the American Rescue Plan and the Inflation Reduction Act. Neither one of those bills had any Republican votes, just as the big, beautiful bill did not have any Democrat votes. In order for something to be considered and or allowable in reconciliation, it has to have something to do with spending debt or revenue. I’ve got to tell you, some of us are a little mystified as to some of the things that were taken out of the federal scholarship tax credit (in response to the Senate parliamentarian’s concerns), which were very disappointing.

What’s in the tax credit, and what changed during the legislative process?

John Schilling: The great big win here is getting 100% non-refundable tax credit that is permanent and uncapped into the federal tax code. I do not want to minimize just how big a win this is because this clearly gives us something that we can build on going forward. Getting this embedded in the tax code was a huge win for us.

But they capped the amount that an individual donor is able to give to a scholarship-granting organization at $1,700. The other problematic thing that [the parliamentarian] insisted on was that there had to be a state opt-in. I don’t know what the parliamentarian has to do with requiring that a state must opt in to this, because to me, that’s policy. I just don’t know why that was something that she insisted on.

Who are the opponents of the federal scholarship tax credit?

John Schilling: The most vocal one nowadays seems to be a guy named Josh Cowen, who is a professor at Michigan State University. I feel like, and I don’t want to get over my skis here, but I’m pretty sure he’s funded by the teachers unions.

He just received an award from the National Education Association, the NEA, for his opposition to school choice.

John Schilling: Yeah, he’s their guy. Josh is out there lamenting that this bill will be bad for private schools, leaving the impression that he and the teachers unions are deeply concerned about America’s private schools. I think some of us have a hard time swallowing that. But that is his position.

Let’s talk about the tax credit mechanics. An individual can give up to $1,700 to a scholarship granting organization (SGO) and then get a dollar-for-dollar federal tax credit for that contribution. And the SGO can award a scholarship to eligible families. What is an eligible family, and how can families use the scholarship funds?

John Schilling: The household income threshold to be eligible is 300% of median income by area, which would capture about 85 to 90% of the K-12 kids in every state.

The eligible uses include things like tuition, tutoring, education technology, special needs services, curriculum materials, even transportation, because the 530b section has broader eligible uses than the 529 section.

That section you’re referring to is a long-standing existing section related to Coverdell?

John Schilling: Yes. Coverdell accounts. And the uses are broader.

How did the parliamentarian’s objections change the tax credit?

We were dead in the water about 10 days ago. And the person who really came in at the end and kind of saved us was Senator Ted Cruz. Senator Cruz and his team, working with members of the Senate Finance Committee, tried to come up with something that was going to get by the parliamentarian. Ultimately, the rewritten product, while it is essentially an ECCA structure, is different because of what we had to do in order to get the parliamentarian’s approval. In addition to a hard cap of $1,700 per donor, the parliamentarian also insisted on the state opt-in. And that is particularly disturbing for us because what we wanted out of both the ECCA and the Universal School of Choice Act was to make sure that students in every state was going to be able to benefit from this.

There are about 35 states that have educational savings accounts (ESAs), or tax credit scholarship programs, or the old-fashioned voucher programs. What is the benefit of opting in for states with existing choice programs?

John Schilling: What we are doing at the federal level could be stacked on top of what states are offering, increasing purchasing power for parents and helping more kids.

Homeschooling families can benefit as well, right?

John Schilling: There seems to be some question about whether this rewritten version that landed in the One Big Beautiful Bill will indeed allow homeschool families to participate. We’re going to try very hard to make sure that they can, because that was the intent all along.

How will the rulemaking process shape the tax credit?

John Schilling: A big part of ultimately implementing this is going to be the rulemaking process, which will be done by the Department of the Treasury. We are going to work with our coalition allies around the country, scholarship granting organization experts, to try to come up with some kind of guidance document that we can give to the Treasury Department as they consider how to write rules around this. That’s going to be really important.

To restate what you’re saying, this is not an education program. This is not a new federal education program that will be regulated and controlled by the U.S. Department of Education. This is a new federal tax credit, and Treasury has jurisdiction over it, and any rules and regulations will be drafted and implemented by the Department of Treasury.

John Schilling: That’s correct. And that is by design. And one of the questions that I’ve gotten asked frequently, particularly since the 2024 election, is ‘what does the federal scholarship tax credit have to do with abolishing the Department of Education?’ And ‘if the Department of Education goes away, doesn’t all that, quote, funding for the tax credit go away?’ Well, no. They have nothing to do with each other, because the beauty of this federal scholarship tax credit is that it is funded by private donations. So it is individuals. We had hoped it would be individuals and corporations, but it ended up just being individuals. So in essence, it’s added money. You get all of our opponents screaming that this is draining money from public schools. The reality is it’s actually adding money to K-12 education around the country.

Right. Screaming about draining money and somehow funding billionaires or supporting billionaires or something.

John Schilling: Those of us in the school choice movement have always believed that what this is about is ensuring that every child in America has access to a great education. We’re not against public schools. We just want parents to be in the driver’s seat so that they can choose the best educational options for their own kids. That’s what we want. The reality is that most of the kids in K-12 are going to remain in public schools. We just want to make sure that we’re creating as many options as possible, whether those be options to go to a private school, a charter school, a micro school, a home school, or a magnet school.

We just want to create a lot of options for kids so that parents can make the best choices for their own kids. That’s just good for kids, period.

The School Superintendents Association has worked with the unions to send a message to Capitol Hill that they don’t want families to have options. They don’t want to expand opportunities. They don’t want families to have choices. They want to ensure that they stay in their residentially-assigned public school, which just seems like a really strange message. But somehow it’s very powerful on Capitol Hill.

John Schilling: That’s great for the adults, but… this has to be about what’s best for the kids, not what’s best for the adults.

You and I follow NAEP scores pretty closely. I think it’s abundantly clear that we can do a lot better. More than 30% of the kids are scoring below the basic level. And when you’re scoring at the below basic level, that is failing. You have less than 40% of the fourth and eighth graders who are proficient in reading and math.

And we’ve got study after study after study that show the existence of choice in a state also has the effect of helping the surrounding public schools do better. Why isn’t everybody for this?

I recommend EdChoice’s 123s of School Choice resource for studies on school choice benefits. What are the next steps for the tax credit?

John Schilling: We will do whatever we can in the rulemaking process to make this as efficient as possible. The start date for this is January 1st, 2027. The speaker has indicated that he intends to do two more reconciliation bills. We’re going to try very hard to get this thing amped up and to get it more robust in one of these future reconciliation bills. And our job as advocates is gonna be to get back up on the Hill, get our folks, our champions energized to be able to do that.

This is about making sure that every child in America has educational opportunity.

I would imagine you heard a school choice myth or two during the big push for the budget reconciliation bill, and certainly over the last eight years as you’ve been working on this tax credit. What’s the one that bothers you the most and that you’d want to tackle today as we wrap up?

John Schilling: This suggestion that the inclusion of this federal scholarship tax credit is somehow going to be bad for private schools in America. That is simply false. That is just not true. The bill is very specifically written where scholarship granting organizations are in the driver’s seat. There is nothing, absolutely nothing, that prevents a scholarship granting organization from issuing a scholarship to a family to attend a private or faith-based school in any state that opts in. So that’s probably the thing that bothers me most at the moment.

At the end of the day, what this is really about is a very different approach to education in America. Those of us who believe in education freedom simply believe that parents have the right to send their children to whatever school works best for them.

The largest funder of the Democratic Party is the teachers union. I don’t want to be partisan about this, but that is a fact. And the teachers unions in America do not like school choice. They do not want to empower parents. And I would remind everybody, go to YouTube and Google Bob Chanin of the National Education Association’s famous speech many years ago, where he basically said, “we don’t care about kids, we’re for the adults.” That’s the difference. You know, we’re here fighting for the kids, and you know, they’re out there fighting for the adults in the system. That’s the difference.

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