Tax Equity and Education Finance

Evaluation of the California Tax System

Equity and Ability-to-Pay Criteria

A necessary criterion for any good tax system is one that shares the tax burden equitably among its citizens requiring every person and business to pay some tax to their government (Brimley, Verstegen, & Garfield, 2016).  The sole purpose of a tax system is to divert private funds to the public sector to provide the necessary goods and services, like education, to all citizens.  The obligation to pay taxes must also be met with a measure of vertical and horizontal equity. Vertical equity ensures taxpayers who share similar economic circumstances pay similar amounts while horizontal equity ensures that “taxpayers in different circumstances…be treated according to those differences” (Brimley et al., 2016, p. 115). Along with the principle of equity, a good tax system should be based on a taxpayer’s ability to pay. People who have a greater capacity to pay will contribute more and those who are not able to pay as much will contribute a smaller percentage.  In theory, the ability-to-pay principle sounds logical and equitable, however, determining economic well-being and wealth is a complicated process.  Unlike in decades past, when property ownership was the primary source of wealth, now people are able to diversify their wealth through means such as investments, stocks, automobiles and off-shore investments which makes determining wealth far more complicated than simply assessing real property.

Adequacy of Yield Criteria

For a tax to be effective, it must generate a substantial revenue. If a tax is not able to yield a significant revenue, then it is merely a nuisance tax that is only able to provide minimum revenue and should be avoided so as to not overburden and further complicate the system.

 Cost of Collection

An additional requirement for a sound tax revenue source is the ease with which the tax can be collected. It “should have relatively low collection and administrative costs for the government and the individual” (Brimley et al., 2016, p. 117). The main goal for government is to maximize their net proceeds so it is advantageous for them to collect the dollars that are easily identifiable and collectable. Unlike real property, such as a home, personal property like investments and stocks are difficult to collect on because they can be difficult to locate and assess.

Predictability (Easy to Estimate)

Predictability and stability are key ingredients when looking for a revenue source for education. School districts function more efficiently when they are able to rely upon a consistent stream of revenue and not be bound by the ups and downs of the economy. This predictability provides schools with “a steady revenue stream regardless of changes in the economy and serves as a solid foundation for budgeting” (Brimley, 2016, 118).

Neutrality

While the original intent of the taxation system was to collect money from the private sector and to allocate those funds to public resources, it was not meant to modify the purchasing and behavioral patterns of taxpayers (Brimley, 2016).  When citizens make purchasing decisions based upon the tax rate, the system is no longer neutral and may begin to interfere with the operation of an efficient economy.

Adequacy and Equity for Taxpayers

On the issue of tax equity, taxpayers should pay taxes based upon their ability to pay. Ability to pay offers equity by proportioning the tax burden in percentages of income rather than dollar amount. The question then becomes how do we measure the ability to pay? In the past, the standard measure of income was a paycheck, however, today, income is derived from a variety of sources other than a salary, such as stocks, rental income, or other personal property assets.

According to Repetti (2008), taxes should be designed to achieve equal opportunity for all citizens. The tax system should protect disadvantaged taxpayers from paying high tax rates that may hinder them from making the best life for themselves, yet it also should ensure that the “tax burden on advantaged taxpayers is sufficiently high to provide the revenues needed to permit a low burden for the disadvantaged” (Repetti, 2008, p. 1132). The quest for a just tax system needs to focus on the fairness of the incomes earned by the taxpayers yet bearing in mind the end goal of achieving the educational objectives necessary for a healthy and productive economy for the future.

Up until Proposition 98 in 1988, education had been primarily financed through property taxes. However, using local property values created large per pupil discrepancies in funding across districts which prompted the courts and voters to shift funding away from property taxes. The California Supreme Court ruled the system unconstitutional and ordered the state to equalize funding by mandating a minimum of 40% of the state’s general fund to be set aside for education each year. Along with property taxes being held unconstitutional as the primary means for financing education, the system used to allocate the funds is complicated and not well understood even by those in the profession (Legislative Analyst’s Office, 2012). The shift away from property tax also reflects the understanding that real property no longer is reflective of a person’s wealth or ability to pay (Brimley et al., 2016). Despite being almost impossible to avoid paying, property tax is a bad measure of wealth given the diverse investment alternatives available, “some of which can escape taxation” (Brimley et al., 2016, p. 131).

A fair and equitable tax should allow for vertical and horizontal equity which treats equals as equals. This may best be exhibited through a taxable income structure.  Although the personal income tax systems vary greatly from state to state, with California having 9 brackets, the federal system is fairly easy to estimate, with 7 brackets varying from 10% to 39.6% depending upon income level (Brimley et al., 2016).  The major disadvantage to funding education through personal as well as corporate income taxes, however, is that collecting the taxes are not economical. The income tax system is highly complex, difficult to administer and costly to collect. Another disadvantage of relying upon income tax as a primary revenue source for education rather than property or sales tax is that it is highly susceptible to economic changes. While corporate income taxes offer another revenue source, it is just as complicated. Corporate equity can be held in tax-exempt forms, they can be evaded through offshore accounts and loopholes within the complex tax codes.

Notwithstanding the aforementioned disadvantages, income tax revenue tends to offer greater across-the-board equity than other options such as sales taxes. While sales taxes provide a revenue-rich source of income for education, they tend to unfairly burden poor families who spend a “larger proportion of their budget on food that do high-income families (Brimely et al., 2016, p. 129). Since sales tax is not income-based, the poorer you are the greater share of your income goes to food and basic life necessities. Despite their instability and susceptibility to economic declines, state sales taxes continue to deliver large revenues which are easy to administer and inexpensive to collect.

Brimely et al (2016) state that “using income as a measure of fiscal capacity creates a fair system of tax burden on society” (p. 115) in that the system equates equal tax burden among equal wage earners. However, the education finance system is far too complex to rely on only one avenue of revenue. Equity in education needs to be a blend of local, state and federal dollars which will provide the stability necessary to sustain unforeseen economic fluctuations.  The greater issue in education is how to promote, sustain and provide the funds necessary for all children to succeed and how to make that happen where all citizens contribute fairly with the realization that funding education benefits all.

 

Brimley, V., Verstegen, D. A., & Garfield, R. R. (2016). Financing Education in a Climate of  Change (12 edition). Boston: Pearson.

Legislative Analyst’s Office. (2012, November). Understanding California’s Property Taxes. Retrieved September 8, 2017, from http://www.lao.ca.gov/reports/2012/tax/property-tax-primer-112912.aspx

Repetti, J. R. (2008). Democracy and Opportunity: A New Paradigm in Tax Equity. Vanderbilt Law Review, 61(4), 1129–1186.

Advertisements

Minimum Funding Guarantees of Proposition 98

The YouTube video below offers a comprehensive and comprehensible explanation of the very complicated Proposition 98 and is presented by those it affected most…students!!

 

Proposition 98 was crafted from an awareness that politics and education should not be dependent on one another. Given the highly politicized nature of education, proponents suggested that the best way to separate the two was by mandating funding of education through amending the state constitution to guarantee a non-negotiable percentage of the state’s general fund to be allotted for education.  Due to this change, education funding now gets special status in budget decisions (Legislative Analyst’s Office, 2009), which helps to free up the legislature from endless political haggling and arm-wrestling with school districts for funding. While the exact text of the proposition and funding formulas are dense and complicated, the official summary states:

Amends State Constitution by establishing a minimum level of state funding for school and community college districts; transferring to such districts, within limits, state revenues in excess of state’s appropriations limit; and exempting excess funds from appropriations limit. Adds provisions to Education Code requiring excess funds to be used solely for instructional improvement and accountability and requiring schools to report student achievement, dropout rates, expenditures per student, progress toward reducing class size and teaching loads, classroom discipline, curriculum, quality of teaching and other matters (“California Proposition 98, Mandatory Education Spending (1988) – Ballotpedia,” n.d.).

Prior to the 1970’s, education funding came from local property taxes which were inherently unequal and did not provide balance or equity for the diverse population of students in California. Richer districts with higher revenues from property taxes had a huge benefit over poorer districts who ironically had higher taxes. There was no equity in the system. After Proposition 98 passed, funding sources were amended. While ¼ of the funds remained derived from local property taxes, about ¾ of the funds came from the state’s general fund and were dispersed to K-12 schools, community colleges, preschool and child care facilities, and to other educational agencies. The general funds are dispersed using a set-pupil revenue amount times the average number of students attending school during the year. In addition to these funds, there are various categorical funds set up by state and federal agencies that are earmarked for specific purposes and must be spent according to their particular guidelines.

When?

Prior to the 1970’s, funding for education was unfair and discriminatory by being highly dependent upon wealth for the basis of funding through local property taxes. Therefore, low-income school districts, with lower tax revenues, received a disproportionate amount of education funding. Proposition 98 was written by a leading education advisor, John Mockler, and approved by California voters as an amendment to the State Constitution which provided a “minimum funding guarantee for public education” (Ed-Data, 2012). It was approved by a slim margin of 49.3% to 50.7%. The measure, which was amended in 1990 by Proposition 111, provides a minimum annual funding level for k-14 schools and comprises over 70 percent of the total funds for K-12 schooling in California.

How?

The funding sources for schools are derived from five sources. The largest portion of schools’ budgets, about 60%, comes from the state’s general fund. Another large share, about 23%, is derived from local property taxes. The federal government provides another 10%, while the remaining funds come from miscellaneous local revenue sources such as fees, contributions, and investments from districts and school supporters (Ed-Data, 2012).

While the complicated formulas associated with Proposition 98 assure a percentage of the state budget will be earmarked for education, it does not stipulate how the legislature can spend it. There are three tests used to formulate the “minimum guarantee” according to the proposition. Test 1, which was only used the first year of implementation and not likely to be used again, requires the state to provide K-14 education at least 39% of the general fund revenues. Test 2, which has been used 12 out of 18 years since implementation, states that funding must grow at least as fast as the economy as measured by per capita personal income (Legislative Analyst’s Office, 2009, p. 98). The third test which was an amendment to Proposition 98 in 1990, known as Proposition 111, provided a “relief valve” allowing the state to use the general fund growth rather than per capita growth as the funding formula for relief in slow growth years. While the choice of which funding formula will be used is automatically triggered based upon the economy and the year to year general fund growth, the legislature can waive the formula and chose to higher or lower the funding level with a 2/3 vote. This is very difficult to do and has only happened once with the 2004-2005 budget.

 Why?

Allowing for a fixed minimum amount of funding for education has given education “special status” in budget decisions. Given that economic resources for education are the responsibility of state and local government agencies, Proposition 98 recognized that while funding decisions were being made in the political arena, they needed to be insulated from the ebb and flow of partisan politics. Not only should education funds be guaranteed but they should also be equitably dispersed. Proposition 98, along with other prior decisions like Serrano vs. Priest, paved a new path for understanding that education is an investment in human capital and should be universally guaranteed. By giving education special dispensation in the state budget, the voters of California recognized and made available a dependent stream of revenue guaranteeing students will be able to “maximize their human potential and be prepared to be citizens and competitors in the global economy and knowledge society” (Brimley, Verstegen, & Garfield, 2016, p. 1).

Brimley, V., Verstegen, D. A., & Garfield, R. R. (2016). Financing Education in a Climate of      Change (12 edition). Boston: Pearson.

California Proposition 98, Mandatory Education Spending (1988) – Ballotpedia. (n.d.). Retrieved August 26, 2017, from https://ballotpedia.org/California_Proposition_98,_Mandatory_Education_Spending_(1988)Ed-Data. (2012). A guide to

Ed-Data. (2012). A guide to california’s school finance system (before lcff). Retrieved August 27, 2017, from https://www.ed-data.k12.ca.us/Pages/GuideToCaliforniaSchoolFinanceSystem.aspx

Legislative Analyst’s Office. (2009). The Basics of Proposition 98, Part 1 of 3. Retrieved from https://www.youtube.com/watch?v=J7kg7y6KUHc

 

 

Science Differentiation through 21st-Century Technology!

My current class in my doctoral program, Technology and Educational Leadership, has opened my eyes to the endless learning tools available using Web 2.0 technology. Given the vast amount of free material on the internet with a click of a mouse, I do hope and believe that very soon textbooks in schools will become obsolete. Imagine the financial benefits for states and school districts if educational leaders began to incorporate Web 2.0 technologies and 21st-century learning into the curriculum, not to mention the additional benefit of ending the textbook industry’s control and manipulation over education.

Having a twice-exceptional child who does not fit into the standard mold, I am always sharing new ideas with his teachers in the hopes of discovering new ways they can challenge and motivate him to learn new things. This is especially difficult in the sciences, which is his area of giftedness. For his 9th-grade biology teacher, the challenge has been how to create new learning situations for him that will expand his knowledge and encourage creativity and growth in his area of passion. As is typical with twice-exceptional kids, their asynchronous development produces highs and lows that can be dramatic. This uneven development also makes it difficult for him to show his learning in a traditional sense such as through writing or multiple choice tests. This is where the internet comes into play!

I recently sent my sons’ biology teacher a series of emails with links to many different science-based tools she can use in her class for enrichment as well as remediation. This is what is so exciting about 21st-century learning…it offers the adaptability that textbooks can’t!

Here a few of my exciting discoveries!

An example of an Open Education Resource (OER) is https://www.merlot.org/merlot/index.htm. Teachers and students have access to individualized lessons, texts, interactive science demonstrations and simulations, and quizzes on any subject possible. Students and teachers are always adding content to the site which encourages collaboration and teamwork. Below is a video link explaining how MERLOT II works.

Another great resource for differentiating science instruction and incorporating 21st century learning through Sumanas, Inc. http://www.sumanasinc.com/webcontent/animations/biology.html. This educational site offers teachers another pedagogical tool to make science more compelling for students. The service provides expertise in all scientific areas through an innovative educational platform that combines traditional course materials with enhanced graphics, video and animation. Below is a screen shot of a video example from SUMANAS, Inc.

Screen Shot 2017-04-05 at 12.39.06 PM.png

A final science-based tool I want to share is http://www.dnaftb.org/. This incredible website offers lessons in all the sciences from genetics and DNA, molecules and bacteria, and everything in between. Each lesson explains the basic concept with animations, a picture gallery, videos, problems, and links. Below is a screen shot of the websites home page.

Screen Shot 2017-04-05 at 12.43.43 PM.png

Amazing Temple Grandin!

In an effort to continuously seek, sense and share new knowledge (PKM) into my ever-expanding brain, I have really embraced the wonders of podcasts and http://www.audible.com recently. This is not to say that I didn’t listen to “books on tape” back in the day, however, now with Web 2.0 access and 21st century learning at my fingertips, I can now deposit more information in my head while driving to & from work hassle-free (and Aidan benefits too!).

I have been listening to Temple Grandin’s new book, The Autistic Brain and it is a wealth of information. She really emphasizes the need to stay away from labels and to rather focus on addressing the symptoms of Autism individually. Given Autism is a “spectrum” disorder, every child is unique and symptoms manifest themselves in a multitude of ways which makes treating them under one label almost impossible. Treat the symptoms, not the label!

Trials & Tribulations with Executive Functioning!

IMG_0292Today was a true test of how well Aidan was able to work through his stress and anxiety when he was asked to clean his room. I have used this poster as a reference many other times as well…pretty much anytime he is asked to do ANYTHING that is not a preferred task!

The poster comes in handy for homework, getting ready for school in the morning, as well as getting tasks accomplished before going to bed.

Aidan and I have had many conversations about executive functioning skills and how important they are now and will be for his future happiness.

Since he is extremely visual, I have found that using lists, posters and picture schedules (mainly when he was younger) serve as a constant reminder and point of reference for him when he inevitably gets distracted from his current task. We have this poster taped to the window in the kitchen!

Me and My 2e life

So, here goes my first blog post! My intention with this blog and the concept of “living with gra2e paradoxy” is to shed some light on twice-exceptionality (2e). Twice-exceptional (2e) children are also referred to as gifted and learning disabled. I hope to offer parents and educators a place of acceptance, information, and hopefully share my daily struggles and triumphs raising a 2e child.

As a doctoral student studying various topics related to the 2e community, I would also like to discuss application and integration of a growth mindset mentality among educators involving best inclusive practices, the collaborative, co-teaching process and gifted education.

If you a parent of a 2e child or a teacher with a twice-exceptional child in your classroom, you may already understand how difficult it is for our kids to be ok with the gray areas in life. For my son, the world is black or white. Period. End of sentence! Even if “being in the gray” happens to be to his advantage, he will fight it tooth and nail.