The Universal Tuition Tax Credit is based on the simple principle that Michigan citizens and businesses should make education a priority, and that those citizens and businesses that are already making education a priority should not be penalized or taxed unfairly. This occurs today when parents and others are forced to pay twice when they support nonpublic schools and when they pay additional tuition to send their child to a public school outside their home school district without a release of funds. The UTTC establishes basic fairness by allowing parents and others who choose an alternative schoolpublic or privateto do so without being penalized. The UTTC will expand the effective options for parents and students so they may choose an educational opportunity that best meets their needs. As described here, the UTTC will benefit both public and nonpublic schools.
Unlike a traditional tuition tax credit that may be used only by parents to offset only their personal income tax, the UTTC is "universal" in character. It may be used by any Michigan elementary or secondary school student. It may be used for tuition paid to a public or private school. It is applicable against three separate state taxes and may be applied universally by any state taxpayerindividual or corporationthat pays tuition for a Michigan student to attend an alternative Michigan elementary or secondary school. The credit may be applied to the state individual income tax,64 the Single Business Tax,65 or the State Education Tax.66 It is important to recognize that the UTTC is a tax credit, not a tax deduction. This means that it can be subtracted directly from the taxpayers tax liability, not simply used to reduce the basis of the tax. Therefore, if a taxpayer has a pre-credit tax liability of $3,000 and a tuition tax credit of $2,000, the taxpayer would pay tax of only $1,000.
The UTTC plan can be accomplished using the existing tax system and, with slight modifications, the existing mechanisms for tax payment, refunds for overpayment, enforcement mechanisms, and credits. Significantly, the Michigan Individual Income tax already allows tuition tax credits for tuition paid to certain colleges and universities. The UTTC modifies and extends this tax credit to elementary and secondary schools. The income tax already allows credits for property taxes (the "Homestead" or "circuit breaker") and home heating costs. The property tax credit alone accounted for $435 million in tax credits in 1993. Other credits are allowed for artwork, certain community foundations and homeless shelter donations, contributions to colleges and universities, and medical savings accounts.67 Similarly, the Single Business Tax provides for a variety of deductions and credits.