বৃহস্পতিবার, ২২ মার্চ, ২০১২

What Should Liberals Be Looking For in School Tax Reform?

If the coalition of Republicans and Democrats working on property tax reforms wants some cover from a liberal on either of these bills, I?m ready to start shilling in a big way. However, there are a few things I still want to see clarified.

Eric Boehm has an awesome piece on the competing school tax/property tax reform bills, and I?m about to steal?excerpt from it excessively for this post. Thanks Eric!

First, here?s what Jim Cox?s HB 1776 bill does. To replace property taxes, the bill would do the following:

The legislation would offset the state?s $12 billion in annual property tax revenue with the new revenue from the higher personal income and sales taxes. Pennsylvania?s property tax system is the fundamental local funding source for school districts.

In an interview with PA Independent, Cox said the property tax was a fundamentally unfair and unbalanced way to fund public education.

?The idea behind the broadening of the sales tax and utilizing an income tax is so we can get as many taxpayers to participate as possible, and with that larger number of participating taxpayers, their burden is much lighter,? he said.

The first thing to say about this is that I want to see the?Independent Fiscal Office?score the bill to make sure those projections are accurate. More information is better.

If the revenue estimates are correct, I don?t really see a problem with it.

My buddy Frank Pintabone on the EASD Board recently obtained for me a useful analysis by Dwight Evans? office looking at a previous version of H.B. 1776 that was introduced by Sam Rohrer in 2008.

Rep. Evans? analysis found that the pay-fors in Mr. Rohrer?s bill would only generate $8.6 billion, leaving the education budget with a $4.3 billion revenue shortfall, despite claiming to be revenue neutral. Sneaky!

This legislation, however, supposedly raises $12.7 billion, so the problem Frank flagged with the 2008 bill does not appear to be a problem for this version. Again though, I want to see what the IFO says about that, but until we have the true score, we?ll have to assume that these changes would be revenue neutral.

If HB 1776 raises just as much revenue as the current property tax system, then I still?think it?s a good deal for liberals?for all the reasons I outlined in this column, and for the reason the Pennsylvania School Boards Association cites:

?This over-reliance on local school property tax by the state ensures that school districts have nothing to fall back on and are forced to rely on increases in property taxes to generate the dollars necessary to fund school programs,? Davare told the House Finance Committee last week during a hearing on Grove?s proposal.??The over-reliance on school property taxes is also the primary cause of funding inequity among school districts.?

Move education finance to the state level and you completely destroy the case for segregation by income in the education system.

Still, there are some political issues to sort out.

Here?s the part I have the most trouble believing:

It also would eliminate most exemptions to the state sales tax, though clothes that cost less than $50 and all food items would remain tax-free.

Eliminating exemptions to the Sales and Use tax is responsible for 4.63 billion of the revenue they expect to generate. Does anybody think they?re going to be able to hold tax expenditures down to just food and clothes under $50? That $50 ceiling is almost certainly going up, and I?ll bet plenty of industries will find a way to protect their exemptions too. I?hope?that?s not true, but I?m cynical. That kind of tax reform is a heavy political lift.

Seth Grove?s local option sales and income tax bill?may ultimately be more politically palatable, and would resolve a problem I have with HB 1776 that I will get to in a second. Grove wants to give Counties the option of passing a 1% sales tax, and an income tax:

Grove has said his plan will succeed where others have failed, because it allows each county and municipality to find a solution that works ? and what works for one area of the state may differ from what other parts might need.

Grove?s bill only would allow counties or municipalities to impose a local option sales or income tax to defer at least 30 percent of their local property tax burden. Voters would be allowed a referendum on the sales tax increase, but not the income tax hike.

The problem I have with moving education finance *entirely* over to sales and income taxes is that property taxes aren?t?all?bad, just half bad. It?s misleading to talk about ?property? taxes because property is really two things ? land and structures.

?Property taxes? are really taxing both those things at the same rate, but it doesn?t have to be like that! You can?split the rate?so that you have one rate for buildings, and another rate for land rents.

The tax on buildings?is terrible. We want more and better buildings, and we don?t want to discourage people from making property improvements. It?s fine to raise money from taxing the *sale* of buildings, but taxing improvements to land is a seriously counterproductive thing to do.

The tax on land rents, on vacant and unimproved land, however, is?progressive and awesome. By no means should we get rid of that, and really, the Grove bill should be amended to?expand?the right to tax land rents to all classes of municipality, since?not all classes are allowed to do this.

The other good thing about the Grove bill is that it rewards areas that want to host more development. Some people see this as a drawback, but I don?t. If your local government intentionally pursues public policies to attract more business and grow the tax base, they should reap the benefits of that:

But opponents of that approach believe the local option could perpetuate or worsen the inequity in the property tax system.

For example, Montgomery County could benefit from a 1 percent additional sales tax because of the King of Prussia Mall, the largest retail complex in the state, which attracts shoppers from Philadelphia and several neighboring counties. Those out-of-county shoppers would be contributing an additional 1 percent sales tax to defer Montgomery County?s property taxes, but that would do nothing to help their own property taxes.

David Baldinger, a leader of the Pennsylvania Coalition of Taxpayer Associations, which includes more than 60 local taxpayer advocacy groups, said a local option sales or income tax would benefit counties with more retail and business activity, but would do little for the majority of Pennsylvania counties that are more rural and less populated.

So what, the areas where nobody lives and nobody wants to live should get just as much money as the most productive, populated areas? Why?

Notice the little trick they snuck in there ?the majority of Pennsylvania?counties?that are more rural? Some of the counties in PA are just big empty blocks. Knowing how many political jurisdictions are rural doesn?t tell me anything useful about the distribution of the?population?in the state.

Do a majority of PA residents live in rural, less populated areas? Duh, no. Most people live near some kind of commercial cluster, and would greatly benefit from the change.

In my view, the best solution would be a version of the Grove plan where Counties are given the responsibility for funding education, and voters choose some combination of taxes on income, consumption and land rents via a ballot referendum.

Another area where I think David Baldinger of PCTA has it wrong is on local control of curriculum:

?The funding needs of schools are, in general, far less diverse than those of counties and municipalities and can be addressed more efficiently and more equitably at the state level while still maintaining local control of curriculum and spending decisions,? Baldinger said.

Curriculum decisions need to be moved to the state level. I know there are probably some liberals who disagree with me about this, but I think it?s wrong. This just empowers the anti-evolution nuts and climate science deniers to brainwash kids with no accountability, if the local political scene supports those views. I think that?s bad. Statewide curriculum is the way to go, especially if all the funding is coming from the state in the first place.

Either one of these bills is going to more progressive than the status quo, so I?m ready to get on board with whatever, but if I had to pick three must-haves for property tax/education funding reform, they would be:

1. Revenue neutrality
2. Retain the option to tax land rents
3. Equal spending per pupil

Source: http://www.jongeeting.net/?p=5308

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