The Republican tax plan, which passed last week, expands 529 college savings plans so parents can use the tax-advantaged funds on K-12 expenses such as private school. This is a win for students and families across Utah.
It also raises important policy questions for the state of Utah.
How can low-income students benefit most from this federal change? This new law gives state lawmakers the opportunity to reconsider how some education programs for low-income students can better meet the unique needs of children from low-income families, especially children coming from intergenerational poverty. The Student Prosperity Savings Program, for example, helps fund 529 plans for low-income high school students.
Could this program better serve low-income students by expanding eligibility to younger children – before learning habits have formed – and allowing them to access educational opportunities outside of a public school? This would improve equity for low-income children by expanding their access to the educational opportunities that their higher-income peers already enjoy. It would also be good for low-income children in public schools, because those schools would feel pressure to better serve this traditionally underserved population.
What does this new law mean for students with special needs? The Carson Smith Scholarship allows parents of students with special needs to use state funds to send their children to a private school. Right now the state finance department cuts a check in the parent’s name and sends it to the private school directly to pay for tuition. Anything beyond the tuition of the private school is given back to the state.
There are a lot of ways to expand the Carson Smith Scholarship to improve education for students with special needs, but this federal change opens up a particular question: Should Carson Smith Scholarship program allow funds to go into a 529 plan? This would allow parents to keep excess funds to use for future education needs. Because of the state tax credit available for 529 savings, it would also make it easier for parents to provide any additional required funds to meet their child’s needs.
How can we best incentivize the business community to help children meet their unique learning needs? Industry leaders understandably want to improve their prospects by helping students enter the workforce as prepared as possible. Incentivizing innovative schooling options that would adapt to the practical needs of children is a better path forward than raising taxes to fund a status quo that forces children to adapt to the practical needs of the education system.
Like individuals, Utah businesses can contribute to 529 plans – and can claim a state tax deduction for doing so – to help children meet their full academic potential. This may serve as a launching point for further industry opportunities to contribute to individual students directly.
For instance, Utah does not currently have a tax credit scholarship – a policy that allows individuals and corporations to give donations to scholarship granting nonprofits, who then provide scholarships to families to pay for the academic path that best meets their needs. It’s worth looking at how we can expand business leaders’ ability to help individual students through these kinds of tax incentives.
For those who believe in the foundational principle of education choice – that the school system should serve students, instead of the other way around – the 529 provisions of federal tax reform is a wonderful Christmas gift. We should all join the dialogue on how to use these tax policy changes to benefit Utah students the most.
Christine Cooke, J.D., a former public school teacher, is education policy director at Sutherland Institute.