The Universal Tuition Tax Credit: A Proposal to Advance Parental Choice in Education

This pathbreaking approach to expanding parental choice in education embodies a proposal to amend the Michigan constitution and establish a Universal Tuition Tax Credit (UTTC). The tax credit would offset a portion of private or public school tuition and would be claimed against state tax liabilities. In addition to improving education, the UTTC would save the state hundreds of millions of dollars per year. Unlike other tax credit plans, the UTTC would help needy families with low state tax liabilities by encouraging the creation of corporate scholarships to offset tuition costs not covered by the UTTC. The per-student credit could be claimed against the Michigan tax liability of any person or corporation. Unlike vouchers, the UTTC would not allow state funds to support religious schools, would not drain funds from the public schools, and would not spawn new entitlements or overregulation of private schools. The study includes detailed fiscal models, a discussion of school choice, a history of Michigan's constitutional impediments to education reform, and proposed language for a constitutional amendment. 76 pages

Contents

• Executive Summary
• I. The Promise of Parental Choice in Education
  • Choice is Breaking Out
  • The Assignment System
    • Common Schools and Government Assignment
    • Education Decisions Under an Assignment System
  • Why Parental Choice Works
    • Parents and Students as Consumers
    • Parents as the Engine of Choice
    • Human Capital
  • Michigan’s History of Parental Choice
    • Private Schools
    • Scholarship Programs
    • Choice in Higher Education
    • Intra- and Inter-district Schools of Choice
    • Charter Schools or Public School Academies
  • Addressing Misconceptions About Choice
    • Parental Choice Especially Helps the Poor
    • Parental Choice Does Not Reduce Educational Resources
    • Parental Choice Improves the Whole System
    • Teachers Benefit from Parental Choice
    • Parental Choice Helps Those Most in Need
    • Urban Leaders Themselves Are Demanding More Choice
  • A "Public Choice" Analysis of the Current System
  • More Money Alone Will Not Improve Public Education
  • A Call for Reform: Empowering Parents
• II. Michigan Constitutional Restraints on Parental Choice
  • History of Article VIII, Section 2
    • "Parochiaid" and the 1970 Amendment
    • The Effect of the 1970 Amendment
  • Should Michigan Have the Most Repressive Constitution?
• III. Expanding Parental Choice with a Universal Tuition Tax Credit
  • Choice Among Government Schools
  • Choice Among Private Schools
  • What is the Best Method of Expanding Parental Choice?
  • A Better Choice: The Universal Tuition Tax Credit
    • What is the Universal Tuition Tax Credit?
    • How does the UTTC work?
    • Mechanics of the UTTC Implementation
  • Key Benefits of the UTTC
  • Examples of How the Universal Tuition Tax Credit Could Be Used
  • Drafting the Universal Tuition Tax Credit Amendment
    • Constitution Versus Legislation
    • General Considerations for Drafting
    • Treatment of Existing Constitutional Language
    • Establishment of the Universal Tuition Tax Credit
    • Protection Against Overregulation
  • Legislative Implementation of the UTTC
    • Tracking Tuition Payments and Credits
    • Minimizing Recordkeeping by Taxpayers
    • Tax Forms and Filing Procedures
• IV. Impact of the UTTC on State and Local Finances
  • A Model of State and Local Finance
    • Current System State Foundation Grant and Local Property Tax Support
    • Per-Pupil Revenues as Indicator of Overall Revenues
    • Student Population Assumptions
  • Universal Tuition Tax Credit Dynamics
    • Private, Public, and Alternative Schools
    • The Education Market
    • Consumer Behavior Under the UTTC
    • Net Impact on State and Local Finances
  • Summary: Financial Impact of a Tuition Tax Credit
• Appendix I: A Model of School Finance
  • Private and Public Financing of Schools
    • Private School Costs vs. Public School Costs
  • A Model of State and Local Finance: Assumptions
    • State Foundation Grant & Local Property Tax Support
    • Student Count Projections
    • Private, Public, and Alternative Schools
    • Universal Tuition Tax Credit Structure
  • Universal Tuition Tax Credit Dynamics
    • The Education Market
    • Price Elasticity of Demand
    • Price Elasticity of Demand for Michigan Alternative Schools
    • Predicting Consumer Behavior
    • Calculating Demand
    • Applying Constraints to the Model
    • Likely Migration to Alternative Schools
    • Limits on Migration
  • The Fiscal Impact of the Universal Tuition Tax Credit
    • Effects on Revenue and Expenses
    • Utilization of the Credit
    • Fiscal Impact of the UTTC Plan
    • Tax Savings from the Tuition Tax Credit
    • Total Spending on Education
    • A Note on Refundable Versus Non-Refundable Credits
    • Notes on Data Sources
• Appendix II. Questions and Answers Regarding the Universal Tuition Tax Credit
• Endnotes
• ADDENDUM