(The Center Square) – Now that the U.S. Department of Treasury has released long-awaited rules for the Education Freedom Tax Credit, pressure is mounting on states that have not opted in, including Washington state.
The regulations released Oct 1 confirm that married couples filing jointly can claim up to $3,400 and give governors instructions for certifying scholarship-granting organizations (SGOs) and provide guidance on student eligibility.
However, many Democrat-led states, including Washington under Governor Bob Fergusson, have opted not to join the program.
Former U.S. Education Secretary under President Obama Arne Duncan took part in a Sept. 15 discussion hosted by the free-market think tank Washington Policy Center about the Education Tax Credit, and urged leaders to opt their state into the program.
“We have to be accelerating student learning, and that is not happening in the vast majority of our states, and very candidly is not happening in Washington,” said Duncan.
Created by the 2025 tax and spending law signed by President Donald Trump under the Big Beautiful Bill, the program lets taxpayers claim a federal credit for donations to SGOs.
Those groups then fund scholarships for tutoring, books, supplies, extended-day programs, special education programs or private schools, as well as other qualified expenditures.
The estimates are that Washington state could benefit upwards of $700 million per year above and beyond local and state funding for education.
“I would say that’s minimally. It could be north of a billion and to be clear that’s on top of state and local money. It doesn’t replace a single dollar. It’s additional. It’s additive. It’s supplemental,” said Duncan.
“And if we can get a lot more kids in Washington state, who are way too far behind academically, if we can get them math tutoring, if we can get them literacy tutoring, if we can get them more after school, we can get them summer school…that will literally not just help improve their grades, that will change their lives.”
How it works
Each taxpayer can claim a credit of up to $1,700, and there is no marriage penalty meaning both spouses on a joint return can claim the full amount for up to $3,400.
Donors claiming the tax credit can give to an eligible SGO in any participating state, regardless of where they live, and SGOs cannot earmark gifts for a particular student.
That means taxpayers can claim credit, but if their home state is not participating in the program, the profits can be directed to another participating state.
Scholarships are open to students in households earning up to 300% of their area’s median income. Treasury officials put that at about 95% of U.S. children, and Education Department officials said roughly 28 million children in the 30 participating states would qualify.
Jorge Elorza, CEO of Democrats for Education Reform, said during WPC’s event last month that the program has the potential to change lives.
“Reasonable minds can disagree as to the wisdom of the federal law. But now that the federal law has passed, the only question is how the money will be spent. The only question is, will it be spent in Washington? Or will it be spent in other states?” said Elorza.
“If Washington does opt in, and let’s say we get just 30% of those people whom it costs nothing to redirect their $1700 away from Treasury and to Washington State…there’s no reason that we have to limit ourselves to just 30% participation.”
Elorza said once the program is up and running, he expects participation to blow past the 30% anticipated rate.
“This program has the potential to be huge. And first and foremost, that’s what gets me really excited.”
States must opt in by Jan. 1 and submit their lists of qualifying SGOs by Feb. 15. SGOs already registered in their state with the required paperwork can begin accepting donations on Jan. 1.
The rules give governors specific, legally binding instructions for submitting those lists. States must include every organization that meets federal requirements and cannot pick favorites, a Treasury official said. States can’t restrict which schools families choose or which allowable expenses scholarships cover.
Duncan said he believes the program can change education for the better for decades.
“This program has the potential to be really, significant…we’re talking about 30% of people whom it would cost nothing to keep those $1700 in Washington.”
“Reasonable minds can disagree as to the wisdom of the federal law. But now that the federal law has passed, the only question is how the money will be spent. The only question is, will it be spent in Washington? Or will it be spent in other states?” said Duncan.
Gov. Ferguson had previously said he was waiting for the updated Treasury Department guidelines before making a decision about whether or not to join the program.
The Center Square reached out to Ferguson’s regarding the Treasury guidance and to find out when the governor will make a decision to join or not, but received no response.