Although both vouchers and traditional tuition tax credits could be used to eliminate the problem of forcing parents of private school students to bear the full cost of both tuition and school taxes, both proposals have disadvantages. Vouchers, for example, are subject to allegations that they drain funds from government schools, permit state funds to be used to support religious schools, will spawn a new type of entitlement program, and invite over-regulation of private schools. Traditional tuition tax credits—whereby only parents are allowed to receive a tax credit—address some of the problems with vouchers, but fail to help low-income and many middle-income families who lack enough tax liability to benefit from a tax credit.

To address these problems, the Mackinac Center for Public Policy developed a new approach to expand parental choice in Michigan by formulating and proposing in 1997 the universal tuition tax credit (UTTC).86

The UTTC proposal allows any taxpayer—individual or corporate, parent or grandparent, friend, neighbor, or business—to contribute to the education of any Michigan elementary or secondary child and receive a dollar-for-dollar tax credit against taxes owed.

The UTTC saves the state money and provides more per-pupil funding for government education. This is accomplished by limiting the credit to one-half the amount that the government allots each school per-pupil. For example, in the 1998-99 school year, the average state per-pupil allocation in Michigan was approximately $5,800. The maximum tax credit allowed under the UTTC proposal would therefore be $2,900. If a student transfers from a government school to a private alternative, the state need no longer spend the $5,800 to educate the child, but instead forgoes at most only $2,900 through the tax credit, producing a net savings for the state of $2,900.

Since the average tuition cost at private schools is roughly half of the government school per-pupil allocation, the amount of the tax credit provides enough incentive for parents to consider sending their children to an alternative school.

The UTTC avoids many of the inherent problems associated with both vouchers and traditional tax credits and was designed to have wide political appeal and practical application. School choice advocacy groups and state legislatures around the nation are adapting the UTTC concept for ballot initiatives and legislative proposals in their own states.