Targeted Approach is Best in Property Tax Relief and School Funding, Says Lincoln Institute Policy Focus Report

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Property taxes provide stable revenue for schools, coupled with targeted state aid for the neediest students and “circuit breakers” for hard-pressed property owners.

"The Property Tax-School Funding Dilemma"

The Property Tax–School Funding Dilemma

States experiencing taxpayer revolts among homeowners are tempted to reduce reliance on the property tax to fund schools. But a more targeted approach can provide property tax relief and improve state funding for public education, according to a new Policy Focus Report released today by the Lincoln Institute of Land Policy.

"Those who have tried to reduce property taxes and improve school performance at the same time have not met with much success,” said Daphne A. Kenyon, a visiting fellow at the Lincoln Institute and author of "The Property Tax–School Funding Dilemma."

States across the country have been under intense pressure for some time to reduce the property tax burden on homeowners. At the same time, the demand has been equally urgent for improved performance in public education, often in the context of litigation aimed at equitable statewide school funding.

The Policy Focus Report, the latest in a series published by the Lincoln Institute of Land Policy, includes a comprehensive review of recent research on both the property tax and school funding, and summarizes case studies of seven states – California, Massachusetts, Michigan, New Hampshire, New Jersey, Ohio, and Texas. The majority of these states are heavily reliant on property tax revenues to fund schools.

While there is no one-size-fits-all solution, the report recommends addressing property taxes and school funding separately:

  •     Property tax relief. Arguing that the use of property tax revenue for schools is fundamentally sound, the report points out that increasing state aid for education does not necessarily result in lower property taxes, and it cautions against switching to greater reliance on a sales tax, for example, to fund schools. Instead, a more targeted effort can achieve fairness and relief, with the greater use of “circuit breakers” that adjust property tax bills based on ability to pay. Many states do not take advantage of this policy instrument, or limit its application to the elderly.
  •     School funding. Addressing the complex issue of statewide funding for schools, the report also recommends a targeted approach – distributing state aid for public education to the neediest school districts, schools, and students. State policy makers should not aim to provide any specific percentage for the state’s share of funding K-12 education, the report concludes.

“The Property Tax–School Funding Dilemma” is the fifteenth Policy Focus Report published by the Lincoln Institute of Land Policy, and follows the two most recent reports, on the management of state trust lands in the West, and the use of conservation easements to protect open space.

Founded in 1974, the Lincoln Institute of Land Policy conducts research and policy evaluations, holds conferences, provides education and training, supports demonstration projects, and publishes books and reports on policy issues relating to land. The Lincoln Institute seeks to improve the quality of public debate and decisions in the use, regulation, and taxation of land by integrating theory and practice, and providing a nonpartisan forum for the discussion of related issues, in the U.S. and abroad, with major programs in Latin America and China.

Daphne A. Kenyon is a visiting fellow at the Lincoln Institute, and principal of D. A. Kenyon & Associates, a public finance consulting firm in Windham, New Hampshire. She also serves on New Hampshire's State Board of Education and the Education Commission of the States. Previously, she served as senior economist with the Office of Tax Analysis at the U.S. Department of the Treasury, the Urban Institute, and the U.S. Advisory Commission on Intergovernmental Relations; chair of the Economics Department at Simmons College; and assistant professor at Dartmouth College.

“The Property Tax–School Funding Dilemma” is available for free downloading at http://www.lincolninst.edu/pubs/PubDetail.aspx?pubid=1308. Requests for print copies can be made to Anthony Flint at anthony.flint @ lincolninst.edu.

CONTACT:
Anthony Flint
617-661-3016 x116
http://www.lincolninst.edu

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