The Illinois Tuition Tax Credit: Who Gets the Credit? Who Pays the Consequences?

New Data Shows Affluent Taxpayers Continue to Enjoy Windfall

New, publicly available data from the 2001 tax year reveals that the biggest beneficiaries of the tuition tax credit law—by far—are Illinois’ most affluent taxpayers. This data from the Illinois Department of Revenue and Research reveals that nearly half of all tax-credit dollars continue to flow to taxpayers with annual incomes of over $80,000.

This new data reinforces the conclusions in last September’s report by People For the American Way Foundation, Misplaying the Angles: A Closer Look at the Illinois Tuition Tax Credit Law. That report analyzed data from the 2000 tax year and found that nearly half of Illinois’ tax-credit benefits (46 percent) went to families earning over $80,000. 9 Soon after the release of last year’s report, Illinois’ former superintendent of education, Glenn “Max” McGee, acknowledged that the tuition tax credit law “probably has not served its intended purpose. Maybe I was naïve. I said this was going to benefit poor kids.” 10

The just-released 2001 data—combined with the previous year’s figures—establishes a clear trend and strengthens the conclusion that the Illinois law acts mainly as a subsidy for middle-class and wealthier parents, while providing minimal financial benefit to low-income parents. Moreover, the law has had this effect even while it has depleted state funds, thereby shortchanging programs and reforms that could address the needs of low-income and disadvantaged students. Specifically, the new data reveals:

  • In the first year of the program, tuition tax credits cost the state more than $61.2 million. By the following year, 2001, the program’s cost climbed 12 percent to reach $68.4 million. In its first two years, the tuition tax credit program has cost the state treasury nearly $130 million in tax revenues. 11
  • Virtually half of all 2001 tax-credit dollars—48 percent—were delivered to taxpayers with annual incomes over $80,000. The share of tax credits going to this upper-income group actually rose slightly from 46 percent in the 2000 tax year. 12
  • Taxpayers earning $60,000 or more claimed two-thirds of the total tax-credit dollars ($45.4 million). 13
  • Fewer than 3 percent of Illinois’ tuition tax credit dollars went to the state’s poorest families—those earning $20,000 or less. The share of all tax credits going to taxpayers in this lowest-income bracket dipped slightly from 2.9 to 2.8 percent. 14
  • Overall, the number of taxpayers claiming the credit increased from 165,781 in 2000 to 189,055 in 2001. While a slightly higher number of low-income residents (earning $20,000 or less) claimed the tuition tax credit in the 2001 tax year, the number of tax-credit recipients in the highest income bracket increased at 10 times the rate of low-income recipients. 15
  • In 2001, only about half of 1 percent of all Illinois taxpayers earning less than $20,000 claimed a tuition tax credit under the state law. This income group received a total credit amount of $1.9 million. On average, a taxpayer earning $80,000 or higher was almost 16 times as likely to claim the credit than a taxpayer in this poorest income group. 16
  • The tax credit gap remains very wide between taxpayers in the highest- and lowest-income brackets. Taxpayers with an income of no more than $20,000 who claimed the tax credit received an average benefit of $179.78, while those earning more than $80,000 reaped an average benefit that was more than double: $398.49. This gap of $218.71 is slightly higher than the previous year’s gap of $216.34. 17

    The new data in Who Gets the Credit? provides additional evidence that the Illinois law has fallen far short of its supporters’ promises and placed extra stress on a state education budget that has already been cut substantially.

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