A new report by the American Federation for Children (AFC) Growth Fund found that nearly three in four tax filers, including 2.4 million Tennesseans, will be eligible to utilize a new federal tax credit that supporters say will supercharge school choice.¶
Lawmakers approved the Education Freedom Tax Credit as part of the One Big Beautiful Bill last year. Under the program, taxpayers will have the option next year to redirect up to $1,700 per year that would have gone to the U.S. Treasury into a scholarship provided by participating scholarship granting organizations (SGO).¶
Eligible families would then have the option to apply for scholarships to support public and private school expenses like tutoring, tuition, special education services, and other academic needs. The AFC estimates that 1.1 million Tennessee students could qualify for the scholarship funding, roughly 94 percent of K-12 students.¶
AFC Senior Fellow Shaka Mitchell discussed the new program on the Firefly’s On the Fly podcast, saying the money will be helpful for both public school students and families of private schoolers who need assistance paying tuition costs not covered by programs like the Education Freedom Scholarship.¶
“I think the Education Freedom Tax Credit is really going to kind of supercharge some of the existing choice programs. And that's not just private choice,” Shaka said. “This can be used by students who attend a charter school or attend a magnet school or whatever their own public school or homeschool, who have needs, who have real needs.”¶
The AFC is the nation’s largest school choice advocacy organization and was a strong supporter of the Education Freedom Scholarship act that allows Tennessee families to use taxpayer dollars for private school expenses.¶
What’s New in the Report
The AFC’s latest report, written by AFC Growth Fund Senior Fellow Patrick Graff, Ph.D., updates prior research by the organization on the potential impact of the Education Freedom Tax Credit both in Tennessee and nationwide.¶
According to the research, if just 10 percent of eligible Tennessee taxpayers take that $1,700 credit, it will raise $377 million for scholarships in the state. That’s more than double the AFC’s initial estimates.¶
Nationwide, the AFC found that if 10 percent of eligible taxpayers participate, the $18.8 billion raised would exceed the tax deductions and credits incurred each year from charitable gifts to all schools, colleges, and universities.¶
“The Education Freedom Tax Credit has created an unprecedented opportunity to open the doors of education freedom for families nationwide,” Tommy Schultz, CEO, American Federation for Children said. “Dr. Graff’s research demonstrates the life-changing difference taxpayers can make for American students by donating to a scholarship granting organization while reducing their own federal tax liability. We look forward to helping expand school choice nationally and bringing the EFTC to as many families as possible through the AFC Scholarship Fund.”¶
How SGOs Will Work
Taxpayers will have to choose what SGO they want their tax credit to be donated to.¶
The AFC plans to operate an SGO that uses this funding to ensure that “a family’s zip code does not determine the quality of their child’s education.” Shaka tells the Tennessee Firefly that other SGOs might choose to focus on different education needs and regions.¶
“So, you might have an organization that says, ‘We want to focus on giving scholarships to kids in Middle Tennessee.’ I know of an organization that is going to focus on the entire state,” Shaka said. “You might have some that say we want to provide scholarships for students in charter schools in West Tennessee. So, the SGOs are really going to be the ones that have to raise the money, one, and have to figure out how they're going to distribute it. So, if you're a family, you can actually apply to multiple of these.”¶
Under the program, participating taxpayers will not be able to earmark their money for their own kids.¶
