Property Taxes and Public Education Financing

Max Sawicky sawicky at epinet.org
Wed Nov 22 07:36:27 PST 2000



> The problem with using property taxes as the primary
> source of education revenues lies not with their
> alleged regressivity, but with the extreme variations
> in the value of property from one jurisdiction to the
> next. Therein lies the reason for the extreme

Right, but that variation gives rise to regressivity, albeit in a different form. Regressive means the share of income devoted to cost -- taxes -- falls as income rises. This is exactly the implication of income variation by jurisdiction. Imagine two towns, each with one resident. One has a $100,000 house, the other a million dollar house. They both need to spend $10,000 to educate their town's one school pupil. The first dude spends 10% of property wealth, the second 1%.


> variations in the amount of funds and resources
> available to spend on K-12 schooling, with the
> suburban school districts having much more than urban
> school districts. In NY, which ranks near the very
> bottom in the US in terms of equity of spending and
> resources, a wealthy suburban district may spend
> as much as 2 to 3 x as a poor urban district.
>
> In theory, the solution to this problem would be to
> have education entirely financed by the state
> legislature, and on the basis of a progressive income
> tax. But public education advocates have been cautious
> here for a number of reasons:
> (1) property taxes are much less susceptible to the
> vagaries of the political process, and thus, are a
> more stable, even if inadequate, source of funding
> than state taxes; education requires long-term
> investments, and huge swings in funding are never
> good -- what is lost on a downturn, especially the
> experienced human capital, is never simply regained
> on an upswing.

The volatility problem is well-taken. Sales taxes are less volatile than income taxes, albeit more so than property taxes. In principle localities could remedy this by setting up rainy-day funds to smooth out spending over the business cycle.


> (2) there is no guarantee that state funds will be
> distributed in an appropriate, fair manner; in NY
> State, the funding formulas are pure "window
> dressing," recognized as such by all parties; the

Yeah but we already know local funds are not distributed fairly either, since wealth is not distributed fairly.


> politicians make a decision about who gets how much,
> and then the green eyeshade people go work it out
> in terms of the formulae. Results: NYC and other urban
> areas get screwed, receiving even a smaller proportion
> of state funds than their percentage of the state
> student population. [And NYC is, of course, the area
> with the greatest concentration of high academic need
> students -- special education, English language
> learners, etc.]
> (3) the history in states where the shift to central
> state funding have been made, such as Michigan and
> California, are not exactly models of what one would
> want to see duplicated.

Care to elaborate?

max



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