School Choice & Charters

Benefit of Illinois Credit Misses Needy, Study Says

By John Gehring — October 23, 2002 3 min read
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An Illinois law that offers parents a tax credit for expenses at public and private schools has mainly helped middle and upper-income families, rather than the poorer families supporters of the program said it would benefit, a new report argues.

The report says the law actually has done little to help low-income families whose children attend public schools. It was released by the People for the American Way Foundation, the nonpartisan arm of the Washington-based liberal advocacy group People for the American Way.

During a time of shrinking state revenues, the law has diverted millions of dollars that could have gone to Illinois’ struggling public school system, according to the report, “Misplaying the Angles: A Closer Look at the Illinois Tuition Tax Credit Law.”

Tuition tax credits have emerged in some states as a more politically viable alternative to publicly financed school vouchers. The report’s contention that lower-income taxpayers in Illinois receive little benefit from the tax credits is consistent with evaluations of tax-credit programs in Arizona and Pennsylvania.

Other states, including Florida, Iowa, and Minnesota, offer various education tax credits. Sometimes, as in Arizona and Pennsylvania, credits go to individuals or corporations for their donations to groups that offer scholarships for private education.

“While the Illinois law is written to potentially benefit taxpayers whose children attend public schools, a closer look reveals that, in practice, public school parents receive very little in the form of tax credits,” according to the 11-page report released Sept. 24.

“Since only private schools charge tuition—which can be a significant expense—the tax credit serves primarily as a reward for Illinois parents with children in private schools,” the report adds. “Indeed, the law’s inclusion of public schools may simply have served as the ‘spoonful of sugar’ that helped ‘the medicine go down.’”

Taking Money

Illinois’ 1999 tuition-tax-credit law provides benefits to taxpayers for their own children’s school expenses. Taxpayers can annually claim a 25 percent credit on books, tuition, and other expenses at public, private, and religious schools above $250, up to a maximum of $500 per family.

The authors of the report, Ralph G. Neas, the president of the People for the American Way Foundation, and Jan Czarnik, the foundation’s Illinois director, write that in 2000, less than one half of 1 percent of Illinois taxpayers earning less than $20,000 claimed a tax credit under the law.

Using data from the Illinois Department of Revenue, the report says that in 2000, tuition tax credits cost the state more than $61 million. Taxpayers earning more than $80,000 claimed 46 percent of that amount in 2000. Less than 3 percent of the total credit, according to the report, was claimed by taxpayers making less than $20,000.

The report also argues that the law’s $250 minimum-expense requirement means that most families of public school students will remain ineligible for the credit because their public school expenses are too low to qualify. More affluent families are more likely to send their children to private school, and the minimum-expense requirement, the report says, “effectively tilts the distribution of tax credit dollars in favor of wealthier tax payers—and the private schools their children attend.”

“One of the sales pitches is that this [tax credit] will help low- income families in failing schools,” said Elliot Mincberg, the vice president and education policy director for the People for the American Way Foundation. “That has not been the case. When you pass tax-credit laws, you take money that could have been used to help public schools, and you subsidize private school tuition.”

Supporters of tax credits and other forms of school choice, however, dispute the report’s conclusions. George Clowes, the managing editor of School Reform News, a publication of the Heartland Institute, which is a free-market think tank in Chicago, says the report’s biggest shortcoming is that it provides insufficient context to understand the findings.

The law, as originally proposed, would have benefited low-income families, he said. “It’s a little disingenuous,” he argued, “for opponents to say it doesn’t help low-income families when they help create a bill which doesn’t benefit low-income families.”


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