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

The Tax Credit Debate in Illinois

When the Illinois tuition tax credit program was first proposed, critics charged that such tuition tax credits would benefit higher-income families whose children were already attending private and parochial schools. Opponents also voiced concern that such a program would decrease already limited resources available for public schools.13

Proponents claimed the tax credits would have the greatest beneficial impact on poorer families, asserting that it would provide them with a broader range of educational options and choices. The Institute for Justice, a pro-tax credit organization, explained it this way: “The tax credit will make it easier for … all Illinois parents to send their children to the schools they believe will best meet their children’s needs. Its impact will be greatest on families of modest means, for whom an additional $500, in many cases, will make the difference in being able to afford tuition at the school of the parents’ choice.” [emphasis added]14

The facts, however, contradict proponents’ claims. The overwhelming bulk of Illinois’ tuition tax credits have proven to be a windfall for middle- and upper-income families, while low-income families—who pay fewer taxes—receive little, if any, benefit from the credit.

Data has recently become available from the Illinois Department of Revenue concerning the impact of the tax credit in 2000, its first full year of operation. In that year, tuition tax credits cost the state more than $61 million. Of this amount, relatively few dollars (approximately $1.7 million) were directed to poor families. By contrast, nearly half of Illinois’ tax-credit benefits—46 percent—have gone to families earning over $80,000. 15 In the meantime, the tax credit law has depleted state funds, undercutting needed improvements that could raise achievement among low-income and disadvantaged students.

At a time when state budgets in Illinois and across the country are constrained by a sluggish economy, many public schools are being forced to limit spending on critical education programs, including teacher and staff development, class-size reduction, bilingual education and special education programs. Instead of providing public schools with adequate resources to support and strengthen these and other programs, tax credits like Illinois’ offer millions of dollars in a back-door tax cut to a relative handful of wealthier taxpayers, while penalizing lower-income parents and the public schools.

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