Where parents choose an alternative school and are required to pay tuitionwhether it be to a public school or a private schoolthe two methods of expanding choice most frequently advocated are the tuition voucher and the tuition tax credit, each of which has its own strengths and weaknesses.
The main strength of a voucher program is that it simply and straightforwardly empowers students who wish to attend an alternative school to do so. Under a voucher program, the state would provide a tuition voucher for a specified amount to any Michigan student who chooses to attend an alternative school. The alternative school at which the student enrolled would submit the voucher to the state for payment. In this way, depending on the amount of the voucher, the students parents tuition bill would be either reduced or paid in full. Such a system would reduce the injustice of parents of alternative school students paying twice for education, and provide financial means for more parents to choose alternative education that better meets the needs of their children.
However, tuition vouchers present several concerns. First, opponents argue that vouchers transfer public funds to private schools and thereby drain funds from public schools. Related to this is the argument that vouchers transfer public funds, albeit indirectly, to religious schools, raising a question of separation of church and state which concerns many people. These arguments touch upon a critical distinction between credits and vouchers. Under a voucher system, the State of Michigan would end up making payments to particular schools, including religious schools. Under the UTTC system, the State would not make any such payments whatsoever. Individual citizens and businesses would support the schools and students of their choice, and simply pay less taxes to the state as a result. There is no direct transfer of public funds involved.
Voucher opponents also argue that vouchers are more likely than tax credits to create a justification for government regulation of schools. Many people feel that if the state is transferring public funds to a person or organization, the state should have control over how that money is used. This leads to increased regulation of the receiving party. Tax credits and deductions, on the other hand, generate less incentive to regulate the receiving institution. Federal housing subsidies, for example, carry with them many more regulations than the home mortgage deduction. This is because the taxpayer is the one choosing to make a payment of his or her own funds, with only incidental tax consequences. This is not to say that there is no incentive to regulate tax credit or tax deduction programs, but rather that there is less incentive than when direct subsidies are involved. The last thing Michigan educators and students need is for nonpublic schools to be hamstrung with the same burdensome regulations that public school administrators and teachers complain about regarding their schools.
Voucher opponents also claim that vouchers will spawn a new type of middle-class entitlement program, with its concomitant trade associations and lobbying organizations seeking increased government funding. Vouchers present the classic public choice problem of concentrated benefits and distributed costs, providing great incentive for people to spend and little incentive to economize. A tax credit, on the other hand, requires that a taxpayer actually spend his or her own money first, and later pay reduced taxes as a result. There is still political incentive to increase credit amounts, but it is less than when a program involves "free money" sent by the government, such as is the case with many welfare programs.
Some have argued that permitting vouchers for only nonreligious schools would obviate the church and state objections, but that alternative is met with its own shortcomings. First, it would directly contradict the sentiments of Art. VIII, Sec. 1, which state that "Religion, morality, and knowledge being necessary to good government and the happiness of mankind, schools and the means of education shall forever be encouraged."
Furthermore, such a provision may be unconstitutional on U. S. Constitution First Amendment Free Exercise grounds. The Council Against Parochiaid was careful in constructing Section 2 as a religion-neutral provision, and even so, part of it was held to violate the Free Exercise clause.63 In addition to constitutional concerns, such a provision would probably alienate many in the religious community, and it would enshrine in the Constitution disparate treatment of nonpublic sectarian and nonpublic nonsectarian schools. This is poor precedent, even if constitutional.
Traditional Tax Credits
The traditional tuition tax creditwhereby only a parent can claim a credit against his or her personal income tax for school tuitionrequires no expenditure of public funds and therefore avoids or minimizes many of the problems with vouchers. Since the parent is paying the tuition directly, there is no transfer of public funds to religious schools, less incentive to create a new entitlement program, and less justification to regulate the nonpublic schools beyond current law.
The main weakness of the traditional tuition tax credit is that it fails to provide effective choice for low-income, and even many middle-income, families. These families simply do not have enough income tax liability to take advantage of a tuition credit.