Law Offices of Gary H Smith, P.C.’s Annual Academic Scholarship of 2020 Essay
by Natalie Rowley
Hot take: the devil could possibly be responsible for the United States of America’s current system of property taxes funding education. Or rather, the fight against the devil caused it. It was once said by old puritans that ‘the old deluder, Satan, [wants] to keep men from the knowledge of the Scriptures …” (https://www.npr.org/2016/04/18/474256366/why-americas-schools-have-a-money-problem) These early puritans believed that the responsibility of teaching children, specifically how to read the Bible, belonged to the entire community. They made a law to make sure this belief was carried out. To translate to today’s vernacular and laws, schools are roughly, varying from state to state, funded 10% federally, 45% state funding, and 45% from local homes and businesses. The 45% local funding is how the village is ‘warding off satan’ and raising a child, apparently. It is an ongoing debate on whether this distribution is wise and actually beneficial for schools and business owners.
Taxing local businesses for education could be seen as symbiotic. To further promote their business, an owner would be wise to not just elevate the quality of their offerings, but the quality of the businesses around them. A little paradise found in a ghost town doesn’t do much good for anyone but ghosts. A nice business wants to be surrounded by other nice businesses, and be located in a nice community, so they get nice consumers, essentially. By supporting the local education system, a business could boast a claim on the students, aka potential future consumers, that are produced from that particular school.
As win-win as the situation previously described sounds, more often than not, it’s the other way around. Local businesses get “squeezed” by unfairly high tax rates (https://garyhsmith.com/commercial-property-owners/) and schools get an unfair distribution of funds. With local homes and businesses providing a large majority of school funding, the differences in quality of education found in a single state is vastly different.
A court case in California, early 1970’s, debated this distribution. A quote cited from this case stated, “The source of these disparities is unmistakable: in Baldwin Park the assessed valuation per child totaled only $3,706; in Pasadena, assessed valuation was $13,706; while in Beverly Hills, the corresponding figure was $50,885—a ratio of 1 to 4 to 13. Thus, the state grants are inadequate to offset the inequalities inherent in a financing system based on widely varying local tax bases.” (https://www.lincolninst.edu/publications/articles/school-finance-property-taxes) These schools in California were getting a large majority of their funds from their local business and property owners. Some schools had the fortune of pulling from affluent businesses and neighbors, others not so much.
If properties are taxed, the quality of education can be a source of debate. But what about the properties themselves? A small business trying to get its footing is often tripped and felled by high taxes. Of course, the business wants to support a better education in their community, but at the cost of its own future, probably not.
The distribution of local, state, and federal funds has, and will likely always be, a hot topic in this country. Luckily many smart individuals are working towards solutions great and small. Rather than eliminating completely the taxing on property for education, many have suggested a circuit breaker of sorts. Just like wires, a circuit breaker system in place means that there would be more situation-based taxing going on. “taxpayers earning below a certain income level should be given some amount of property tax relief when their property taxes exceed a certain percentage of their income.” (https://itep.org/property-tax-circuit-breakers-1/)
It is also suggested to divide and distribute the taxing more equally state wide, and not just locally based. “. . . property tax burdens that are excessive in relation to a household’s current income can be alleviated directly, rather than indirectly through increasing state aid for education. Furthermore, in the face of scarce resources, states should make limited use of measures that extend relief to all taxpayers, including high-income and wealthy ones. . . This report is among several which conclude that circuit breakers are the best means of targeting property tax relief to ability to pay” . (https://www.lincolninst.edu/sites/default/files/pubfiles/the-property-tax-school-funding-dilemma-full_0.pdf)
In conclusion, for the sake of property and business owners, as well as for schools, it is clear that the more moderate and considerate approach for specific local and business needs is the correct choice. More moderate property tax and more equal distribution for schools, the match made in heaven that society, and perhaps even the early puritan colonizers, are looking for.
Sources:
https://garyhsmith.com/commercial-property-owners/
https://www.lincolninst.edu/publications/articles/school-finance-property-taxes
https://www.npr.org/2016/04/18/474256366/why-americas-schools-have-a-money-problem
Natalie Rowley 