Sen. Ron Wyden and Rep. Richard Neal accuse the Treasury of pushing the new tax break further than the law allows.
By Bernie Becker, POLITICO
The top Democrats on Congress’ tax-writing committees want to be clear: They think that the scholarship tax credit that Republicans included in last year’s megabill is bad policy. But that’s not their immediate issue with the new incentive.
Instead, Sen. Ron Wyden of Oregon and Rep. Richard Neal of Massachusetts — the ranking members of Senate Finance and House Ways and Means, respectively — are arguing in a new letter to Treasury Secretary Scott Bessent that his department’s latest guidance on the credit is expanding the program beyond how the law was written.
Their opinion matters with control of both chambers up for grabs in the midterms, and Wyden and Neal eager to reclaim their committee gavels — including the power to subpoena administration documents and drive a legislative agenda that could include rolling back provisions of the One Big Beautiful Bill Act.
Under the credit established in the GOP’s party-line policy package last year, taxpayers can effectively divert up to $1,700 of what they owe in income taxes to qualifying scholarship programs. But one of the big unanswered questions ahead of last week’s proposed rules was whether Treasury would allow a set of joint filers to each claim the credit, essentially allowing a maximum $3,400 credit in that household.
That’s in fact the route that the Trump administration went — a path that experts say would greatly increase the cost of the program beyond what Congress’ official scorekeeper originally projected.
And while the proposed rules note that approach is “consistent” with “other instances” in which the Internal Revenue Code has viewed a joint return as two individual taxpayers, Wyden and Neal argue that Treasury’s stance here is in fact “wildly inconsistent” with past practice and are now demanding Bessent answer a dozen separate questions about the matter.
“This throws doubt upon Treasury’s interpretation of many provisions of the Code, creates a great deal of uncertainty in the administration of our tax laws, and could balloon the deficit by increasing the cost of the credit by a magnitude of six to $150 billion over the next decade,” wrote Wyden and Neal.
Several of their questions cite other incentives where joint filers aren’t treated as separate taxpayers, like the Child Tax Credit and the deduction for state and local taxes.
A Treasury spokesperson didn’t immediately respond to a request for comment.
Meanwhile, other Democrats on the Hill who have already proposed repealing the scholarship credit are making it clear that Treasury’s new guidance has only hardened their opposition to the policy.
Many are pointing to the fact that the scholarship credit is leaving some Democratic governors with an increasingly difficult decision — whether to opt in to a program that teachers unions and other groups argue will use public money to prop up private schools, or to essentially refuse education funding that might then go to other states.
“Despite what Republicans claim, these regulations make it clear this voucher scheme is designed to prop up private schools — at the expense of our public schools,” said Rep. Gwen Moore (D-Wis.), a senior member of the Ways and Means Committee.
On the other side of the aisle, House Ways and Means Chair Jason Smith (R-Mo.) argued that Democrats were “shamelessly” standing against the incentive.
“While they defend a one-size-fits-all system, Republicans are standing with parents whose children are trapped in failing schools and helping them afford the education their children deserve,” Smith said
