Voters Actually Like New Taxes for Schools

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Long before the election of President Joe Biden, who has proposed raising taxes on both wealthy individuals and corporations, voters have signaled that they are ready for new taxes to support public education. That was a message the electorate sent in November by passing ballot measures in Arizona, Colorado, Oregon and elsewhere.

The $1.9 trillion pandemic relief package signed into law on Thursday includes $126 billion earmarked for K-12 schools, reflecting Biden’s support for public education. But congressional Republicans all voted against it, and some Republican-controlled state legislatures in Florida, Iowa, New Hampshire and elsewhere have been promoting school vouchers that allow families to shift taxpayer dollars from public schools to private-school tuition or even school supplies.

So now is the time for public-school advocates to take a page from states and localities that mounted ballot initiatives that succeeded in November.

In Arizona, a referendum to increase income taxes by 3.5 percent on those who earn over $250,000 and use the proceeds to support schools and increase teacher salaries, passed by a wide margin. The measure, which is expected to raise close to $1 billion and relieve a chronic teacher shortage, grew from the 2018 teacher walkouts that swelled into national protests against stagnant teacher salaries and classroom funding. (Ironically, this effort to relieve the state’s teacher shortage could be outweighed by a spate of anti-teacher legislation passed earlier this month by Arizona’s Republican-controlled legislature.)

Colorado voters repealed a provision in their state’s constitution that limited residential and non-residential property tax assessments; had the law not been repealed, it could have cost Colorado school districts close to $500 million.

And in Multnomah County, Oregon, which includes Portland, voters overwhelmingly approved a ballot measure that will provide free comprehensive preschool for poor and many middle-income residents, as well as pay raises for preschool teachers, with a graduated income tax increase beginning with households earning over $200,000 annually. The tax hikes are expected to raise $132 million for county schools this year.

Most recently, Rhode Island approved two education-related ballot measures in a special election this month. The first authorized up to $15 million for early-childhood care and for an educational capital fund; the second gave the state a green light to issue at least $107.3 million in bonds to support local colleges.

As the pandemic has weakened school budgets and widened long-standing educational inequities, such measures are especially important now. “The vast majority of state and local tax systems are inequitable” and take “a much greater share of income from low- and middle-income families than from wealthy families,” according to The Institute on Taxation and Economic Policy, with taxpayers whose incomes are in the bottom 20 percent shouldering a state and local tax burden that is 50 percent higher than household’s whose earnings are in the top 1 percent. In the 10 states with the most regressive tax policies, the bottom 20 percent of earners pay up to six times as much of their income as wealthy residents.

The popularity of direct democracy via ballot initiatives has grown in recent years as a decade of partisan standoffs has limited federal support for local and state government.

Ironically, it was the 1978 passage of the most famous ballot initiative, Proposition 13 in California, that started eating away at school budgets. Proposition 13 placed strict limits on property-tax increases, boosted the popularity of direct democracy and now serves as a cautionary tale of the perils of ballot-measure overreach. It led to a slew of economic distortions, including housing shortages and low home ownership, that have been hard to correct because the law also requires a two-thirds vote of the legislature to increase taxes. Today over a dozen states have supermajority requirements to raise taxes, according to David Brunori, a tax expert and professor at George Washington University Law School.

In November, a ballot measure that would have repealed Proposition 13’s restrictions on raising commercial property taxes — restrictions that still peg property assessments of companies like Disney to 1970s valuations — failed in part because of the pandemic and fears that, despite the proposal’s exemptions for small businesses, it would hurt small retailers and mom-and-pop companies.

Indeed, the recent election outcomes offer some useful lessons about crafting successful ballot measures, including the importance of targeting popular local services like schools. Raising taxes based on income, as Arizona and Multnomah County, Oregon have done, also ensures more equitable cost sharing. While some cities, like San Antonio, have relied on sales taxes to increase education funding, regressive taxes are not ideal, especially at a time of increasing income inequality.

Local funding efforts can widen inequalities, which is why state governments must play a bigger role in ensuring equitable funding across school districts. Today, about half the states do little to equalize per-pupil funding among rich and poor districts. Illinois, for example, which until recently funded schools almost entirely via local property taxes, had left poor districts chronically underfunded. A 2017 law retooled the state’s funding formula to make it more equitable across districts.

The Biden administration has promised to increase funding for the poorest districts. Indeed, the relief package, in addition to requiring districts to publicize plans for returning to in-person schooling, includes money aimed at increasing education equity, as well as educational support and social services for homeless children. The federal government should go further by creating a matching-grant program to encourage states to increase overall school funding and to target that support for the poorest districts.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andrea Gabor, a former editor at Business Week and U.S. News & World Report, is the Bloomberg chair of business journalism at Baruch College of the City University of New York and the author of "After the Education Wars: How Smart Schools Upend the Business of Reform."

©2021 Bloomberg L.P.

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