Property Tax Post: Is the U.S. Property Tax System Exacerbating Income Inequality?

Some argue that using local property taxes as the primary source of education funding  creates a situation in which  poor districts with low property values inevitably create a lower funding base than wealthier districts with high property value.

The Economist recently identified the “unusual” way that the United States funds public education through local property taxes as one of the main contributing factors to the perpetuated success of the most economically advantaged children. Most other industrialized democracies fund education from general state revenues rather than local property taxes.

The cover story from the January 24th issue of The Economist, entitled “America’s New Aristocracy: Education and the Inheritance of Privilege,” discusses the advantages enjoyed by the children of America’s wealthier families that allow them to thrive in a meritocratic society. The authors conclude that “[t]oday’s elite is a long way from the rotten lot of West Egg” (of Great Gatsby fame), arguing that “[m]ore than ever before, America’s elite is producing children who not only get ahead, but deserve to do so: they meet the standards of meritocracy better than their peers, and are thus worthy of the status they inherit.”  

While state government funding for education is slightly higher than local government funding for education—roughly 46 percent versus 43 percent, respectively—a study released in October 2014, by the Center for Budget and Policy Priorities (CBPP), found that state-level funding for the 2014-15 year has increased over last year, it continues to lag behind pre-recession per student funding. Twenty-seven states are funding education at higher levels in the current fiscal year than last year, but 60 percent of the states analyzed by CBPP are still funding below pre-recession levels.

State-level education funding is often targeted to districts with greater student need—such as low-income students, non-native English speakers and children with disabilities—but as The Economist and CBPP both point out, the state money is rarely enough to equalize spending between rich and poor districts. Until education funding becomes less reliant on local property taxes and the wealth of students’ families, America’s elite will continue to be “an hereditary aristocracy.”

Continue the conversation on Bloomberg BNA’s State Tax Group’s LinkedIn page: Should the United States continue to rely on local property taxes to fund public education? If not, what is the best alternative?

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