Tax credit law to be repealed

Smith says proposal gives students better access to tax credit

The state's booming economy is bad news for students and parents hoping to cash in on Michigan's tuition tax credit.

Gov. John Engler called for the tax credit law to be repealed in his Jan. 28 State of the State address, but with not enough support in the legislature for a total repeal, some lawmakers have tried to change the logistics of the tax credit instead.

Legislation introduced last week by Sen. Alma Wheeler Smith (D-Salem Twp.) would change the eligibility requirements for the tax credit, tying it to the higher education budget rather than tuition increases at each university.

"We really need to do something about the tuition tax credit," Smith said. "We don't have the votes for repeal."

Currently, universities must keep yearly tuition increases below the level of inflation for students to qualify for the tax credit. But with inflation at 1.8 percent, none of the state's 15 public universities were able to keep increases that low for the 1998-99 school year.

The tuition tax credit provides a credit equal to 8 percent of all fees and tuition paid, with a maximum amount of $375 each year.

In July, the University Board of Regents approved a 2.8 percent increase in tuition for the academic year.

The increase was the lowest in more than 10 years - the result of an additional 4.8 percent in state appropriations.

Cynthia Wilbanks, the University's vice president for government relations, said tying the tax credit to state appropriations could increase funding and keep tuition low.

"The state's ability to fund higher education at a level above inflation gives the universities power to hold back their tuition increases," Wilbanks said.

"It's very much in line with what we have been saying for a long, long time."

Sen. John Schwarz (R-Battle Creek), who chairs the Senate Appropriations Higher Education Subcommittee, said he likes the idea of removing the link between the tax credit and tuition.

"It gets rid of the requirement that schools have got to keep tuition increases at less than inflation," said Schwarz, a co-sponsor of the bill.

"I think that's a pretty good concept if this law isn't going to be repealed."

For the fiscal year 2000 budget, the $34 million designated for the tax credit was rolled into the higher education budget.

Schwarz said he eventually hopes to see an end to the tax credit so the money cmoney could go directly to universities every year.

"My first choice would be to get rid of the tuition tax credit, and my second choice would be something like this bill," he said.

Wilbanks said the University also opposes the tax credit.

"We would prefer to have the tuition tax credit eliminated," she said.

"And instead provide an appropriations level that would allow us to restrain tuition increases."

Despite early bipartisan support for the bill, Schwarz said he's unsure whether there are enough votes in both the House and Senate for passage.

The bill currently awaits debate in the Senate Committee on Finance.

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