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Alternatives to the Local Property Tax for Educational Finance

Published online by Cambridge University Press:  28 April 2015

Thomas F. Hady
Thomas F. Hady*
Affiliation:
Rural Development Service, U.S. Department of Agriculture
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Extract

If we could get a nickel for every time the demise of the property tax has been predicted in this century, we probably could invest the proceeds and use the interest to finance a program of property tax reform. In a sense, this subject is old.

In another sense, however, there is something very new about discussing alternative ways of raising money for local governments. In August 1971, the California Supreme Court issued its decision in the now well-known case of Serrano v. Priest; in March 1973, the U.S. Supreme Court overturned a similar ruling by a lower court in Texas. The Court ruled that the present system of financing local schools in California, which relies heavily on the property tax, unconstitutionally “conditions the full entitlement to such interest on wealth, classifies its recipients on the basis of their collective affluence and makes the quality of a child's education depend upon the resources of his school district and ultimately upon the pocketbook of his parents.” Since that time, more than 50 similar suits have been filed in some 31 states, and the U.S. Supreme Court is reviewing an appeal from Texas in a case similar to Serrano.

Type
Research Article
Information
Journal of Agricultural and Applied Economics , Volume 5 , Issue 1 , July 1973 , pp. 85 - 93
Copyright
Copyright © Southern Agricultural Economics Association 1973

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References

1 Serrano v. Priest, 487 P2d 1241 (1971); San Antonio Independent School District v. Rodriguez, U.S. 1973.

2 U.S. Bureau of the Census, Census of Governments, 1967, Vol. 4, No. 1, Finances of School Districts, U.S. Government Printing Office, Washington, D.C., 1969, p.10Google Scholar.

3 Barr, Richard, et. al., “Review of Existing State School Finance Programs,” Staff Report, President's Commission on School Finance, 1971, p. 14.

4 Levin, Betsy, et. al., Public School Finance: Present Disparities and Fiscal Alternatives, Vol. 1., report prepared for the President's Commission on School Finance, Jan. 1972, p. 61.

5 Rossmiller, Richard A., et. al., Fiscal Capacity and Educational Finance: Variations among States, School Districts and Municipalities, National Educational Finance Project, Gainesville, Fla.; Wisconsin Univ., Madison, Sept. 1970, p. 78.

6 Orazem, Frank and Janssen, John R., Financing Local Schools, Extension Service, Kansas State Univ., Manhattan, C-463, Sept. 1972Google Scholar.

7 Op. cit., p. 79.

8 Smith, Adam, An Inquiry into the Nature and Causes of the Wealth of Nations, Modern Library edition, pp. 777–778Google Scholar.

9 Heller, Walter W., “Taxation,” Encyclopedia Britannica, 21:839–841, 1964Google Scholar.

10 See, for example, Netzer, Dick, Economics of the Property Tax, Washington, Brookings, 1966, p. 165Google Scholar.

11 Ibid., p. 164.

12 Advisory Commission on Intergovernmental Relations, State-Local Finances: Significant Features and Suggested Legislation, Washington, Government Printing Office, 1972, p. 197Google Scholar.

13 Bridges, Benjamin, “Family Need Differences and Family Tax Burden Estimates,” National Tax Journal, Dec. 1971, p. 423Google Scholar.

14 This is particularly true if Federal income taxes are a state deduction. See Melichar, Emanuel, State Individual Income Taxes, Univ. of Conn., Storrs Agr. Expt. Sta., Monograph 2, July 1963.

15 Moscovitch, Edward, “State Graduated Income Taxes -- A State-Initiated Form of Federal Revenue Sharing,” National Tax Journal, March 1972, p. 53Google Scholar.

16 Op. cit.

17 ACIR, State-Local Finances, op. cit., p. 191.

18 One good description is in Ecker-Racz, L. L., The Politics and Economics of State-Local Finance, Englewood Cliffs, Prentice-Hall, 1970, p. 60Google Scholar.

19 ACIR, State-Local Finances, op. cit., p. 178.

20 For a more complete discussion, see Netzer, op. cit., ch. IV.

21 For an introduction, see Goode, Richard, The Individual Income Tax, Washington, Brookings Inst., 1964Google Scholar.

22 Wicks, John H. and Killworth, Michael N., “Administrative and Compliance Costs of State and Local Taxes,” National Tax Journal, Sept. 1967, p. 309Google Scholar.

23 Maxwell, James A., Financing State and Local Governments, revised edition, Washington, Brookings, 1969, p. 102Google Scholar.

24 Elasticity estimates used in this paragraph are all from ACIR State-Local Finances, op. cit., p. 301.

25 Brazer, Harvey E., “The Case for Local Control and Financing of Elementary and Secondary Education,” Proceedings of the Sixty-Fourth Annual Conference on Taxation, National Tax Association, 1971, (Columbus, Ohio, 1972) p. 763Google Scholar.