Senate Democrats Move To Repeal Education Freedom Tax Credit Before 2027 Launch

What’s happening: Senator Mark Kelly (D-AZ) and 29 Democratic colleagues introduced the Keep Public Funds in Public Schools Act, a bill that would repeal the Education Freedom Tax Credit (EFTC) — the federal school choice tax credit signed into law last summer as part of the One Big Beautiful Bill Act. 

Why it matters: The EFTC is the first federal law that could expand school choice to families in all 50 states. It provides a dollar-for-dollar tax credit of up to $1,700 for individual donations to scholarship granting organizations (SGOs), set to take effect in 2027. Twenty-nine states have already opted in. The repeal bill, backed by 163 national and state organizations, sets up a major fight over the future of K-12 education funding before the first scholarship dollar is distributed.

By The Numbers

The details: The bill would strike Section 25F of the Internal Revenue Code and the associated income exclusion under Section 139K, effective for taxable years ending after December 31, 2026 — just before the new tax credit takes effect. Kelly pointed to Arizona’s own Empowerment Scholarship Accounts as a warning, citing reports of over $10 million in taxpayer funds spent on banned purchases, including gift cards and luxury hotel stays. The bill is cosponsored by senators including Bernie Sanders, Chuck Schumer, Elizabeth Warren, and John Fetterman, and endorsed by the National Education Association, American Federation of Teachers, Save Our Schools Arizona, and the National Center for Learning Disabilities.

The other side: School choice advocacy group American Federation for Children (AFC) Chief State Strategy Officer Ryan Cantrell called the repeal effort “misguided,” saying the EFTC “empowers taxpayers and families to direct K-12 education dollars where they see fit.” AFC noted that 29 states have already embraced the program and called school choice “wildly popular and here to stay.” 

What’s next: The bill faces long odds given Republican control of both chambers of Congress. But it signals that the EFTC will remain a political flashpoint heading into 2027 implementation. The real battle may come during future budget negotiations, where Democrats could push to defund or cap the program.

How this connects: The College Investor has previously covered the Education Freedom Tax Credit in detail, including eligibility requirements and implementation timelines. Eligible students must come from households earning no more than 300% of the area’s median gross income, and states must complete administrative steps before 2027 for SGOs to begin distributing scholarships. Whether the repeal effort gains traction or not, families in participating states should continue monitoring their state’s opt-in status and SGO approval process.

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