Editorial Team Opinion: When we talk about education funding in 2026, we’re all focused on the usual suspects like budget cuts and teacher salaries. But the real, unexamined drain on public resources is the massive, unchallenged system of tax exemptions. These breaks, which mostly benefit private schools and their wealthy donors, are an unseen cost that directly siphons billions from the public treasury, money that should be funding our public schools. We have to confront this fiscal reality because the way it’s set up now actively sabotages the promise of a fair education for every kid.
Key Takeaways
- Billions in tax exemptions for private schools and their endowments shrink the tax base that’s supposed to fund public education.
- In big cities, property tax exemptions alone for private institutions can cost local school districts over $100 million in lost revenue.
- Donations to private schools are tax-deductible, creating a public subsidy for private education that takes money away from public projects.
- Public education supporters need to demand full transparency from state and local governments about the true cost of these exemptions.
- Rethinking the tax-exempt status for wealthy private schools could unlock huge amounts of money for underfunded public school systems.
The Hidden Bill: Billions Diverted from Public Schools
We love to praise educational philanthropy without ever asking what it actually costs our public services. The truth is, every tax-exempt dollar given to a private school is a dollar our public schools will never see. The Center for American Progress (CAP) put a number on it in 2024: over $50 billion a year nationwide lost to exemptions for private institutions and their donors. This figure covers everything from property tax breaks on huge campuses to income tax write-offs for big-ticket donations.
What could even a piece of that $50 billion do? It’s enough to pay for universal pre-K, give teachers a real raise to attract good people, or fix crumbling school buildings in district after district. But that money stays private, propping up institutions that are already sitting on piles of cash. Just look at Fulton County, Georgia, where the tax-exempt status of private school properties translates into millions in lost property tax revenue for the Fulton County School System. This isn’t a hypothetical exercise. It’s a real, measurable hit to the funds available for the vast majority of our children’s education.
Property Tax Exemptions: A Local Burden, a National Trend
Property tax relief is the most obvious part of this scheme, but we tend to ignore it. Private schools, like other non-profits, usually don’t pay property taxes on their land and buildings. The stated goal might be to encourage educational choice, but the practical result is that local towns and school districts get stuck with the bill. A 2023 study by the Lincoln Institute of Land Policy (LILP) showed how these tax-exempt properties can make up 10% to 20% of a city’s entire assessed value, and in wealthy areas with a lot of private schools, that number is even bigger.
For instance, look at Atlanta’s Buckhead neighborhood. It’s home to several big-name private schools that occupy huge tracts of valuable land. Because they’re tax-exempt, the surrounding homeowners and businesses have to carry a heavier property tax load to fund city services, including the Atlanta Public Schools. This has created a two-tiered system where people who can afford private tuition also get a public subsidy through tax breaks, while the general public pays more to prop up a public system that’s been deprived of that very same revenue. It’s a classic setup of privatizing the gains and socializing the costs, and it’s fundamentally unfair to students in public schools.
Charitable Deductions: Subsidizing Privilege?
On top of property taxes, federal and state tax codes give huge breaks for donating to educational institutions, private schools included. When a wealthy individual makes a large donation to a private school’s endowment, they get to deduct it from their taxes. This means the government, and by extension, the public, is effectively subsidizing that private gift through lost tax revenue. The official line is that this encourages philanthropy. But does it encourage the right kind of giving, or just reinforce the status quo?
Think about a donor giving $1 million to a private academy that already has a multi-billion-dollar endowment. Because their taxable income is lower, the government collects less revenue. That lost money could have paid for programs for students with disabilities or brought much-needed technology into schools in underserved areas. Instead, it’s indirectly propping up an institution that probably has amazing facilities already. The point is to question why public policy is structured to channel public funds (even indirectly) toward institutions serving a tiny elite while public schools are fighting for basic resources. We have to ask if these tax incentives are truly serving the public good or just making the divide between private and public education even wider.
Addressing the Counterarguments: The “Public Good” Defense
Defenders of these tax breaks always argue that private schools provide a public good by educating kids who would otherwise be in public schools, supposedly reducing the burden on the system. They also point to the scholarships and community programs many of these schools offer. These points sound nice, but they completely ignore the full financial picture.
The argument that private schools “save” public systems money is wildly overstated. Many private schools are extremely selective and serve a demographic that looks nothing like the general public school population, especially when it comes to students with higher needs. And the scholarships they offer, while well-intentioned, don’t come close to offsetting the billions in tax revenue we lose. A 2025 report from the National Education Policy Center (NEPC) found that for every dollar of “savings” from private school enrollment, public systems lose much more in potential tax revenue from all the breaks. The net effect is a deficit for public education.
Then there’s the fact that the “public good” argument ignores the incredible difference in resources. Many private schools are sitting on enormous endowments and have fundraising operations that public schools couldn’t dream of. Why should taxpayers keep subsidizing institutions that already have such a massive financial head start, particularly when our own public schools are chronically underfunded? It feels like we are asking the public to help pay for a private club’s new swimming pool while the community park falls apart. It’s time for an honest assessment of who really benefits from these policies.
The hidden cost of tax exemptions on education funding is just not sustainable. It’s a structural problem that is bleeding public schools dry of the resources they need, making educational inequality worse, and gutting the principle of a strong public education system. We have to start pushing for policies that serve the majority of students. It’s time to demand real transparency from state and local governments about the financial damage of these exemptions and force a re-evaluation of tax policies that are penalizing public education.
What are tax exemptions in the context of education funding?
They’re tax breaks, mostly from property taxes and on large donations, that are granted to private educational institutions and their donors. It means these private entities don’t pay taxes that others normally would, which shrinks the overall pot of money available for public services.
How do tax exemptions for private schools impact public school funding?
When a private school doesn’t pay property taxes, your local government and school district lose that revenue, which could have funded public schools. At the same time, when wealthy donors get tax deductions for giving to private schools, it reduces overall state and federal tax collections, leaving less money for public education.
Are there any benefits to tax exemptions for private schools?
Proponents say they offer educational choices, take students out of crowded public schools, and do charitable work through scholarships. The problem is that critics argue these upsides are tiny compared to the massive financial drain on public funds and the way these policies make educational inequality worse.
What is the approximate financial scale of these tax exemptions?
While numbers vary, a recent analysis from the Center for American Progress puts the nationwide figure at over $50 billion a year. That total includes all the breaks on property taxes and the income tax deductions people get for donating to private schools.
What can be done to address the impact of tax exemptions on public education?
It starts with demanding transparency from government about the true financial hit from these exemptions. From there, it’s about public advocacy to reform the policies and re-evaluating tax codes so they actually support public education. That could mean putting caps on some deductions or changing the rules for which wealthy institutions get to be tax-exempt in the first place.
