Misplaying the Angles: A Closer Look at the Illinois Tuition Tax Credit Law

The Illinois Law: Who Really Benefits

Data released from the Illinois Department of Revenue for the first year that the tuition tax credit was available (2000) reveals that the state’s education tax credit is regressive, benefiting many more middle- and upper-income families than those with incomes less than $20,000. (This figure is used as a benchmark since it is only slightly higher than the federal poverty line for a family of four: $18,100.)16 For example, taxpayers earning more than $80,000 annually claimed 46 percent of the entire $61 million credit amount in 2000, or $28.2 million. Taxpayers earning $60,000 or more claimed almost two-thirds of the total credit. On the other hand, less than 3 percent of the total credit was claimed by taxpayers making less than $20,000 a year (see table below).17

In the year 2000, less than one half of 1 percent of all Illinois taxpayers earning less than $20,000 claimed a tax credit under the state law. This income group received a total credit amount of $1.7 million. By contrast, almost 13 percent of all taxpayers making more than $60,000 claimed the credit, costing some $40 million (see table).18

In short, taxpayers claiming a tax credit who earned more than $80,000 received nearly 16 times more benefits than those earning less than $20,000. The few taxpayers using the credit whose incomes were below $20,000 received an average tax credit of only $189, while those making more than $80,000 reaped an average benefit that was more than double: $405.19

In addition, the $250 minimum expense requirement means that most families with children in public schools will probably be ineligible for the credit. In a suit challenging the constitutionality of the Illinois tax credit in the fall of 2000, the plaintiffs estimated that public school students pay tuition, book fees and lab fees of less than $40 on average.20 For example, in Joliet, a low-income school district, no families with children in public elementary schools would have been eligible to receive the tax credit because their public school expenses were too low. A family would need three children in Joliet public high schools in the same year just to reach the $250 threshold for minimum eligibility.21

Since wealthier families are more likely to send their children to private schools, the $250 minimum expense requirement effectively tilts the distribution of tax credit dollars in favor of wealthier taxpayers—and the private schools their children attend.22 State Senator Dan Cronin, R-Elmhurst, who sponsored the law, acknowledged that the law would help the “non-public school system” remain “viable.”23

Of the more than 323,000 K-12 students enrolled in Illinois private schools, approximately two-thirds are in Catholic schools. Not surprisingly, the Illinois Catholic Conference lobbied heavily in favor of tax credits. In fact, Governor George Ryan signed the bill into law in June 1999 at St. Stanislaus Kostka Catholic School in Chicago, a not so subtle clue concerning the law’s intent—to primarily benefit private and parochial schools.25

The Catholic Conference of Illinois has admitted that the tax credit particularly benefits those students already enrolled in private schools and acts as an incentive for parents to keep their children in private, religious schools. According to Joan McKinney, associate director for the Catholic Conference of Illinois, the credit has not resulted in increased enrollment in Catholic schools, but it “may keep people in [parochial] schools who may otherwise have left.”26

To date, the average Illinois tax credit has amounted to approximately $369 per taxpayer. To claim this credit, a parent would have to spend about $1,726 in educational expenses. As previously stated, few public school expenses reach this level. Many private schools, including Catholic schools, however, charge students tuition between $1,300 and $2,200 a year.27

As a result, parents with children enrolled at such schools can easily take the maximum amount of the tuition tax credit ($500) for their children’s education expenses. Other private schools located across the state charge an annual tuition of more than $5,300.28

Given that many parents with children in these schools would have enrolled their children in private schools even without the credit, the tax credit effectively allows these parents to subsidize a private school education with dollars that could otherwise have gone to public schools or other state priorities.

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