If we apply this analysis to the price of alternative schools given the existence of a tuition tax credit, we can predict consumer behavior. Table 6 on the next page shows how the UTTC changes the incentive for a parent to send his or her child to an alternative school. It reflects how the decrease in the effective price of alternative school tuition due to the tuition tax credit would change the demand for the services of alternative schools.

Table 6. Incentives to Migrate from Traditional Public Schools to Alternative Schools
Year Average Alternative School Tuition 80% of Avg. Alternative School Tuition Maximum Tax Credit Per Student Maximum Tax Credit As Share of Tuition Change in Relative Price of Tuition Raw Desired Migration Smoothed Desired Migration
1998 $2,600 $2,080 - - 0.00 0.00 -
1999 $2,717 $2,174 $578 0.21 -0.21 0.21 0.17
2000 $2,839 $2,271 $892 0.31 -0.10 0.10 0.14
2001 $2,967 $2,374 $1,226 0.41 -0.10 0.10 0.10
2002 $3,101 $2,480 $1,578 0.51 -0.10 0.10 0.10
2003 $3,240 $2,592 $1,950 0.60 -0.09 0.09 0.09
2004 $3,386 $2,709 $2,344 0.69 -0.09 0.09 0.09
2005 $3,538 $2,831 $2,759 0.78 -0.09 0.09 0.09
2006 $3,697 $2,958 $3,197 0.86 -0.08 0.08 0.08
2007 $3,864 $3,091 $3,659 0.95 -0.08 0.08 0.08
2008 $4,038 $3,230 $3,768 0.93 0.01 -0.01 -
 Annual Tuition Growth Factor: 1.045  Price Elasticity of Demand: -1.0

Table 6 presents basic data for the school year 1998-99, in which no tuition tax credits are granted. We assume an average alternative school tuition of $2,600 in 1998.96 Because the tax credit is not yet implemented, Table 6 shows that the maximum tax credit is zero. In this base year, a parent pays 100 percent of the cost of alternative school tuition.

The decreasse in the effective price of alternative school tuition due to the tuition tax credit would change the demand for alternative schools.

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