A new report from EdBuild, Building Equity: Fairness in Property Tax Effort for Education, analyzes the way public schools are funded via property taxes and how this affects school funding equity.
Close to half of public school dollars in the United States are raised locally, mostly from local property taxes. But not all property tax bills are created equal. In some states, tax rates are fairly similar across districts, while in other states, property owners in one district may be putting in twice the tax effort as those in another.
Those disparities in “tax effort” for education funding are a key emphasis for the report, which aims to determine whether the burden put on poorer districts is more than their wealthier counterparts. The findings do show a “regressive” tax rate overall in education funding from property taxes, meaning a majority of the states studied had lower tax rates in wealthier neighborhoods, but that’s not the main takeaway.
The key problem highlighted in the report is the taxation of non-residential property, like businesses, factories and farms. The state-by-state analysis shows that districts “often fail to effectively leverage the non-residential property tax base for school funding.”
Simplified, it often occurs that districts fail to have progressive tax rates on high value properties, meaning they need to make up the difference in education funding with higher taxes on areas that already have smaller tax bases.
So, while equitable education funding should look like this:
Instead, it ends up looking like this:
When this happens, the state’s education funding is inherently unfair. Higher value properties and parts of town aren’t contributing their fair share of school funding, either limiting overall funding or increasing the burden on needier areas.
This report shows that states have a real capability to increase equity in education funding (or do the opposite) based on a few key policies:
- Including non-residential property taxes in the conversation around funding.
- Guiding and limiting districts’ local tax rates to promote fairness in tax effort.
- Taking into consideration the income levels of local taxpayers and setting relative, progressive tax rates for education funds.
- The final point of policy revolves around how the state determines each district’s needed budget, and how much they pay toward that total. Essentially, this will determine the tax burden that is put on the local taxpayers.
The general concept of property tax driven education funding seems to be intrinsically inequitable. But, if it is to continue to serve as the model, states must take steps to craft policy that balance the dollars going to districts and the tax burden placed on all citizens.
If public education is meant to provide every child, no matter his or her background, with the opportunity to learn, grow, and thrive, then funding for public schools must be raised in a way that is aligned with this mission: fairly and equitably, in a manner that supports rather than harms needy communities.
How is it fair that poorer communities shoulder a greater tax burden than wealthier ones, while often still having their students receive fewer resources?
See EdBuild’s full report to understand how states vary on their levels of fairness in educational funding.