The policy objective of the UTTC is to establish a per-child tax credit against the state Individual Income tax, Single Business Tax, and State Education Tax for ANY taxpayer who pays tuition for a Michigan student to attend ANY Michigan public or non-public elementary or secondary school. The amendment is completely nondiscriminatory; it applies equally to nonreligious and religious schools, to private schools and to public schools.
To maintain incentive for tuition payers to be prudent purchasers of nonpublic educational services, the credit should equal only 80 percent of the tuition paid. The only exception to this restriction is that persons paying tuition for children from families whose income is below the federal poverty level should receive a tax credit equal to 100 percent of the tuition paid. However, in either case, the credit may not exceed a certain maximum amount. This maximum amount shall be 10 percent of the average state and local per pupil revenue for school district operating purposes for the first year following ratification and shall increase evenly over a nine-year period to 50 percent of the average state and local per pupil revenue for school district operating purposes.
Suggested language defining the UTTC:
SUBJECT TO THE LIMITATION OF THIS SECTION, THERE SHALL BE A CREDIT AGAINST AMOUNTS PAYABLE UNDER THE STATE INCOME TAX, THE STATE SINGLE BUSINESS TAX, THE STATE EDUCATION TAX, OR ANY SUCCESSOR TAXES, AND OTHER TAXES AS PROVIDED BY LAW TO ANY PERSON FOR PAYMENTS MADE BY THE PERSON FOR TUITION FOR EDUCATION FOR ANY RESIDENT CHILD ATTENDING A PUBLIC OR NONPUBLIC ELEMENTARY OR SECONDARY SCHOOL IN THIS STATE.
THE TAX CREDIT PER PUPIL SHALL BE LIMITED TO THE LESSER OF THE MAXIMUM CREDIT ESTABLISHED IN THIS SECTION OR 80 PERCENT OF THE ACTUAL TUITION PAID PER PUPIL FOR EDUCATION AT A PUBLIC OR NONPUBLIC SCHOOL. THE TAX CREDIT PER PUPIL FOR TUITION PAYMENTS FOR A PUPIL WHOSE FAMILY INCOME IS BELOW THE FEDERAL POVERTY LEVEL SHALL BE THE LESSER OF THE MAXIMUM CREDIT ESTABLISHED IN THIS SECTION OR 100 PERCENT OF THE ACTUAL TUITION PAID.
THE MAXIMUM CREDIT PER PUPIL PERMITTED IN THE STATE FISCAL YEAR FOLLOWING THE RATIFICATION OF THIS AMENDMENT SHALL BE AN AMOUNT EQUAL TO TEN PERCENT OF THE AVERAGE STATE AND LOCAL PER PUPIL REVENUE FOR SCHOOL OPERATING PURPOSES FOR PUBLIC ELEMENTARY AND SECONDARY SCHOOLS. FOR EACH FISCAL YEAR THEREAFTER THE MAXIMUM CREDIT SHALL INCREASE OVER THE PRIOR YEAR BY AN AMOUNT EQUAL TO AN ADDITIONAL FIVE PERCENT OF THE AVERAGE STATE AND LOCAL PER PUPIL REVENUES, UNTIL THE MAXIMUM CREDIT AMOUNT PER PUPIL IS EQUAL TO FIFTY PERCENT OF THE AVERAGE STATE AND LOCAL PER PUPIL REVENUE.
THE LEGISLATURE SHALL PROVIDE BY LAW FOR THE IMPLEMENTATION OF THIS SECTION.
The primary purpose of the credit is to end the penalty on parents and others who both pay taxes to support public schools and pay tuition at alternative schools. The purpose of extending a 100 percent credit to children of families below the poverty level is to provide educational opportunity to students whose parents may not be able to pay even the 20 percent of the tuition charged.
The phase-in of the maximum credit amount will create a positive fiscal impact on state finances by allowing time for students in traditional public schools to switch to lower-cost alternative schools, thereby reducing the amount of state funds needed for traditional public schools.