A careful analysis of Michigans state and local financing structure for public
schools, using a model that includes both the incentives for alternative school enrollment
faced by parents and the effect on the taxpayers of those choices, presents several
First, the UTTC will be popular. If the state provides a tuition tax credit to
parents who choose to send their children to alternative schools, many will take that
credit. We can anticipate that, as the tuition tax credit increases, more parents will
choose to send their children to alternative schools, even if that tax credit does not
fully cover their tuition.
Second, even with the UTTC, a majority of parents will keep their children in public
schools, which will increase in quality. Even if the tuition tax credit ends up
supporting 80 percent of the costs of sending a child to an alternative school, sending
that child to an alternative school will still cost parents more than a public school. For
this reason alone, many parents will send their children to traditional public schools. As
discussed elsewhere in the report, the increase in competition will also force traditional
public schools to improve. Thus, after the tuition tax credit has been phased in, public
school education will also provide a much more attractive option.
Third, the public school system will remain intact. One common objection to
tuition tax credits and other forms of school choice is that they would cause the
destruction of the traditional public school system. A sober analysis shows that is simply
not the case. Even taking into account the full tuition tax credit proposed in this study,
the traditional public school system continues to spend roughly $14 billion in direct
per-pupil expenditures and enroll 1.4 million students when the credit is fully phased in.
Clearly, it will be forced to become more efficient, but the traditional public school
system will continue.
Fourth, taxpayers will save money with the UTTC. Under reasonable assumptions
about the number of parents who would choose to send their children to alternative
schools, the cost savings from some children moving from 100-percent-taxpayer-financed
schools into alternative schools more than outweighs the reduction in state revenue. This
analysis projects that, counting the costs of the tuition tax credit, Michigan taxpayers
would save over $550 million each year when the program is fully implemented.
Fifth, local municipalities are unaffected by the UTTC. Because the UTTC applies
to only the state Individual Income tax, state Single Business Tax, and State Education
Tax, local municipalities will experience no loss of revenue due to the tax credit.