This song is about how mankind is failing as the steward of the Earth's resources.
Green and Blue © ..................................Michael Raucci
From the chimneys come black and gray
What once was forests is charred today
Oil spills on oceans black
Furs they fill a burlap sack
Landfills piled up so high
Through darkened lungs our children cry
The sun shines through and burns my skin
The Earth she bears mankind’s sin
Children who shan’t be fed
Into wars are people led
There are no fish left in the sea
Gluttons write our legacy
(chorus)
Green and Blue
The colors of life’s mystery
Green on land and blue at sea
I hope someday for me and you
That we live in Green and Blue
Our power plants make toxic waste
There’s poisons in the food we taste
The blood of sharks turns oceans red
For fin soup they are slaughtered dead
Colored Green and Blue, Earth ought to be
But brown and gray is all I see
The acid rains down from the sky
While leaders feed us hopes and lies
(chorus)
Green and Blue
The colors of life’s mystery
Green on land and blue at sea
I hope someday for me and you
That we live in Green and Blue
The polar bear hasn’t very long
The nightingale can’t sing her song
The darkness that envelopes me
Is mankind’s folly and debris
No matter what, Earth will go on
When from her plains mankind is long gone
Life will recover after many years
And Green and Blue will reappear
Green and Blue are nearly gone
Won’t you listen to this song
There’s time to change our planet’s state
Or Black and gray is our Earth’s fate
And extinction will we men await
Friday, March 26, 2010
Monday, March 15, 2010
Property Taxation and School Funding; A Flawed System
Property Taxation and School Funding; A Flawed System
Michael Raucci
"We spend so much money on the military, yet we're slashing education budgets throughout the country. No wonder we've got smart bombs and slow children.”....Jon Stewart
“In this world nothing is certain but death and taxes.” Benjamin Franklin
If there's one thing that everyone in New York agrees on, it’s that their property taxes are too high. I've never met anyone who complained because they wanted to pay more.
There are two types of property: real property and personal property. Real property includes land and any fixed improvements to that land including homes, barns, tennis courts and so on. Personal property would essentially be any other belongings. In New York State, personal property is typically not taxed after the initial consumption tax at the time of purchase. Real Property Taxes raise revenues primarily for schools and local governments while income and consumer taxes are often designated for state and federal government use, though some of that money does also filter back to schools and local governments.
In the current system, the majority of real property taxes go towards education. I propose that New York State abandon the Real Property Tax as a method of funding education. In this blog, I will expose the flaws of this tax, provide an argument for its abolition and outline a more sensible system to replace it.
First lets understand why education must be a publicly funded program and why that public funding must be distributed across the entire population. Education serves two purposes. It allows individuals to explore and expand their hopes, dreams, and potential. It also serves a greater communal good which I will describe later. All Americans contribute towards the educational system because it benefits us all. We all were products of it at some point in our lives and its continuous production of skilled and intelligent graduates creates a society that is capable of sustaining and funding a high quality of life for all citizens. Some people feel that because they do not have children or because their children go to private schools for which they pay an additional tuition they should not have to pay school taxes. This is a faulty argument. What many people don't understand, and it’s a bitter pill to swallow, is that you do not pay taxes to send YOUR children to school. You pay taxes to support the public school system, which exists to educate all American children regardless of race, color, creed, religion or socioeconomic status. If the government builds a new bridge or a new highway you pay for it in your taxes whether you use it or not. It’s a tax that everyone (or in the case of school taxes property owners) pays; people with 10 kids and people with no kids, native Americans and immigrants. It’s a public benefit program which ultimately benefits all of us because an educated public possesses the skills to work, contribute to society and pay taxes which assist in sustaining our culture and society.
Below are some of the flaws and negative effects of the current system of funding public K-12 education:
1) The current Real Property Taxation system pits the old against the young. Because Real Property Taxes are primarily utilized to fund grade schools (K-12), the money that is collected benefits children and adolescents (5-18 years of age). They however, do not pay these taxes. The people who own homes, farms, land, and businesses do. When taxes become an excessive burden to members of the community, they seek to redress the situation. The only recourse they have is to vote NO represent a system gone wrong, wasted tax dollars, and wasted lives. Of course, this isn’t an accurate representation in most cases, but when people are struggling to save their homes, their savings, or their livelihoods it is hard to differentiate. Young people begin to feel similar misgivings about the older taxpayers in the community when budgets are voted down and programs are cut from the schools. Not only can palpable acrimonious divisions develop within the community but the respect and understanding between generations is lost. Communities are torn. A good example of this misunderstanding and acrimony took place in the Pine Bush School District last year. The school board and superintendent presented a budget of approximately 99 million. This budget was approximately the same as the prior years and included many cuts including staff reductions. If this budget did not pass then a state mandated contingency budget would be put in place. Utilizing state formulas the contingency would be more than the proposed budget. In other words, if the budget were not passed the taxpayers would have to pay more. This vote was a no-brainer. No one should have voted NO and yet in the final tally more than 800 people voted NO; they voted to have their taxes increased for no reason.
2) The Real Property Taxation system creates animosity between educators and taxpayers. When taxpayers complain of the financial strain of property taxes the focus of their ire is often the teachers. Why? Because teacher salaries and benefits comprise the bulk of the cost of education and consequently of the school budget. Some community members begin to visualize that money is being taken from their pockets and put into the teachers’. In most European and Asian nations, where educational standards and achievement often exceed those in the United States, teachers are highly respected and revered members of the community. Paying teachers well makes perfect sense if one wishes to live in an advanced high quality of life country. The problem is that the communal payoff for those teacher salaries is not realized for many years later when those well-educated students become productive members of the society. Most people do not have the foresight to understand that the securing of the best and brightest to teach today’s youth costs money, money enough to lure them away from even higher paying industrial or private sector jobs. Better teachers yield better students, which yield a better society with a higher quality of life. But when the money to fund students’ education (via teachers) comes from their neighbors and when there is financial pain associated with this, anger sets in towards the recipient of the money. That recipient is seen as the teachers.
3) The Real Property Taxation system acts as a disincentive to home and business owners to improve their property. If someone improves their property then their assessment goes up and they pay more taxes. Because of this many people refrain from improving their homes or even worse avoid utilizing the building inspector when making changes to their homes in an effort to limit their property tax exposure. When buildings are erected, electrical wiring and plumbing modified, etcetera without the building inspectors approval process, the assessors re-evaluation of the property is not engaged and the assessment remains the same, but because the building inspector is not involved, shoddy and hazardous workmanship can result in dangerous living and working environments. I have also heard home and business owners lament that though they had the means to improve their homes and business facilities they would not do so because of the lifetime of tax increases it would mean. We should want our town to look good and for our homes to look good and for our neighbors’ homes to look good. There should be nothing that stands to make someone feel otherwise, but that is what the real property taxation system does. Instead, there should be incentives for people to improve their properties because when a neighbor improves their property it raises the value of all the homes around them and when a neighbor leaves their home in disrepair it reduces the value of all the homes around them and of the community in general. Improving ones homes, business and community imparts a sense of pride and beauty. Why would we deny ourselves this by retaining a system that disincentivizes property improvement.
4) Property taxes which fund schools are anti-family. Families with school aged children who move into the community are viewed as new financial burdens by the existing community. It costs an average of about $10,000 to educate one child. Imagine a family with four school aged children moves into a community and into a home whose assessed value results in $10,000 in school taxes. Their tax dollars only cover the expenses of one of their children’s schooling. The other three children’s educational expenses must be picked up by the community at large. In effect, that one family causes everyone else’s taxes to increase. The current system causes dissention between people with children and people without children or people whose children are grown. Quite simply the people without children may view those with children as increasing their financial hardship. In some localities, town boards have enacted laws whose hidden purpose is to limit the number of school aged children entering the community and the school district because each additional family with children rarely contributes more in property taxes than the additional tax levy their children create. These laws often focus on reducing multi-family dwellings and non-senior rental properties because they attract lower income families with school age children.
5) The current system pits neighbor against neighbor. If one believes their taxes are too high they can grieve their assessment. In order to properly grieve one’s assessment, they must find comparable homes usually in the same or a similar neighborhood whose assessments are lower. This should justify their desire to have their own assessment lowered. This process can result in confrontation between the griever and the owners of the homes the griever uses as comps because the assessor can either grant a reduction or decide that the griever’s assessment is in fact correct and that the comps' assessments are too low, resulting in future assessment increases for the owners of those homes. This unfortunate tax increase for the comp owners is a direct result of the original griever pointing their homes out to the assessor. Some places fortunately have laws, which restrict assessors from increasing an assessment to only when improvements are made, a sale takes place, or a town wide Re-Val is undertaken.
6) The Real Property Taxation system acts as a deterrent to industrial and commercial growth. This could be the most important reason for dismantling the current system. High school taxes act as a deterrent to commercial enterprise setting up their businesses in New York State. A purely ends motivated business will go to the location that allows it the least expenses, which is often out of the state or country. A lack of business results in a lack of jobs, which results in a reduced ability to pay property taxes, which do not go down with a person’s income. When businesses are seeking to locate in New York there is extreme competition between communities that are willing to offer incentives in the form of reduced tax burden causing communities to sacrifice tax dollars for the prospect of local job creation.
7) A Property tax is a regressive tax that impacts the poor more than the rich. A regressive tax is one whose effective rate decreases as the amount to be taxed increases. Regressive taxes impact lower income families more because the tax accounts for a higher percentage of those peoples’ income than higher income families (Progressive taxes escalate along with the income of the payee). Typically, a middle class person with a family ties up their wealth in a home. If a person’s entire net worth is tied to their home and that home is assessed at $300,000 and the real property tax rate is 5%, then they must pay $15,000 in taxes. This accounts for 5% of their net worth, which must come from minimal liquid assets. A wealthier person who owns a $600,000 home but whose net worth of $6,000,000 (which is primarily secured in interest bearing vehicles) pays the same 5% property tax rate. If they were to pay the same 5% tax on their property then they would pay $30,000 which is only 0.5% of their net worth and which comes from their sizeable interest bearing liquid accounts. In this realistic scenario, the poor person who lives in a home with half the value of the wealthier person pays property taxes at a rate 10 times as high when measured as a function of net worth. To add to the insult, the rich person’s home is valued at twice that of the poor person’s. According to itepnet.org low income families paid 3.0% of their income in property taxes in 2002, while middle-income families paid 2.4% of their income and the wealthiest taxpayers paid 0.8%. A fairer system would be income based which is progressive.
8) The Real Property Taxation system causes inequity between school districts. Communities in which wealthier people have congregated will raise more money for their schools than those in poorer communities. Why should poor and middle-income families have to sacrifice more in order to provide an education for the children in their community? This problem is worsened when one considers the long-term effect of this funding disparity. Wealthier districts will be able to pay teachers more and therefore are likely to attract the most qualified applicants. School facilities at wealthier schools can far out weigh those of cash strapped districts, boasting science classrooms that rival pharmaceutical laboratories or computer labs with the newest technologies. This disparity often allows those students in the wealthier districts to excel academically beyond the students in the poorer districts. Taken one step further, this can increase the societal gaps between low, middle and high income families as those that receive the more privileged education from the wealthier schools will frequently outstrip the less privileged in college admissions and ultimately job acquisition. The system maintains, even solidifies the class hierarchy.
9) The current system promotes cronyism. The valuation of land, homes, and other improvements is not an exact science. There is much latitude in an assessment and whether consciously or not assessors are effected by their friendships, biases, social and financial debts, and political affiliation. Anyone who has ever attended a grievance hearing is well aware of this.
10) Localities that host significant numbers of large tax exempt organizations are at a disadvantage. Properties used for religious purposes, parks, military facilities, and government buildings are at a great disadvantage in school funding with large tracts of land and property removed from their tax rolls.
11) Property taxes are not responsive to variations in income. A person who loses their job will come home and still be responsible for the same unchanged property taxes despite a significantly reduced ability to pay them. If the school taxes were income based then when the person lost their job and their income was reduced so too would their school taxes be reduced. Income taxes are much more sensitive to a person's ability to pay. They are progressive. Property taxes are especially difficult on the elderly who after retirement find themselves property rich but cash poor.
The Real Property Taxation system came into existence in the United States when the country was still essentially a feudal society. There were few land owners and they were all rich. With farming and burgeoning industrialization, land could and often was used for profit. Taxing land made sense at the time as land and other property values were a good reflection of a person’s wealth. Nowadays, property ownership is by no means limited to the rich. In fact, the foundation of the American Dream is homeownership. Many Americans currently make mortgage and property tax payments, which exceed 50% of their net income leaving very little for other bills, food, and other necessities. We no longer live in an agrarian society and it is rare for people today to generate income from their residential property. Raising a person’s taxes as the value of the property increases makes no sense because as the value of the property increases, there is no increased income realized by the owner. An income increase is only created when the property is sold and it would be sensible to tax that profit. As property taxes increase there is no guarantee of a commensurate income increase to offset the money lost. In a bad economy, the real property taxpayer is hit with a double whammy. As the economy goes down so do alternate funds for public operations, therefore property taxes go up despite the property owners decreasing ability to pay them.
Recommendations:
1) Abolish the property tax as a means to fund education. In fact, all property taxes should be limited to sales or should be based upon a linearly increasing rate above a certain threshold (e.g. The property tax wouldn’t be engaged until a property value exceeded $500,000. At the threshold it would be a minimal tax defined by a small percentage, lets arbitrarily say 0.1%. As the value of the home increased so too would the property tax percentage. At a value of $1,000,000 perhaps the tax would raise to .2%. There would be prorated percentages in between.)
2) Institute a new state income tax whose sole purpose is to replace property tax revenue for the funding of schools. I do not have the data to determine what that income tax rate increase would be but I have heard that a 1.0-2.0% state income tax increase would negate the contribution that currently comes from property taxes. This would be far fairer because the amount paid would increase with increasing net wealth; a progressive tax. It would make sense if this tax were applied prior to any deductions or at least prior to most deductions. This would eliminate the common and unscrupulous tactic of large corporations utilizing tax law loopholes to avoid taxation. Finally, I would recommend that this money be in a lock box fund. This School Funding Money should be treated just like money collected for social security, which cannot, by law, be touched by Congress and utilized for any other purpose.
3) Another state income source could be a point of purchase Internet sales tax. Anyone who makes a purchase on the Internet from New York State would pay the typical New York State sales tax. The tax would have to be on the New York based consumer so that they paid the tax no matter where the product was coming from. If you only taxed products that originated in New York it would make New York businesses less competitive.
4) The state needs to stop playing games with lottery money. When the lottery was introduced it was touted as the savior of education. All the additional money would be funneled into the state's education budget offsetting rising property taxes. This is not exactly what occurred. Albany bureaucrats pulled a bait and switch. When lottery money started to roll in, they began to pull money that was originally budgeted for education away. The net effect was that education saw no increase in funding. The same amount of money simply came from a different source. Education needs to be budgeted for properly. Lottery income should be nothing but gravy. No more bait and switch.
5) Superintendents of Schools, School Boards, and Town and City Government officials need to band together and demand these changes. The Association of Towns which takes place every year in NYC would be an excellent venue to begin the process.
6) As part of state revenue collection modification, the state will need to create a formula whose implementation would be overseen by an independent committee to determine how money will be distributed to school districts. This will result in a more equitable distribution of education funds than the current system. There will be a cascade of changes that will occur, some of which might not initially be apparent. One change will be in how teacher’s unions negotiate their contracts. I would recommend that individual teacher’s union unite under the umbrella organization NYSUT. Under this system NYSUT would negotiate on behalf of all teachers in the state. Variances in salaries would be required to make up for differences in cost of living. These would be based upon formulaic multipliers much like the ones in place for doctors who bill the NYS Workers Compensation System. In this system different areas of the state are rated based upon cost of living differentials and assigned a multiplier. A base fee is established and different multipliers are used to determine the fee to be received by doctors from different areas (e.g. The base fee for a physical therapy office visit might be $50. If the multiplier for Orange County was 0.9 and the multiplier for Manhattan was 1.2 then the Orange County therapist would receive $45 and the therapist from Manhattan would receive $60). A similar system could be set up to determine teacher salaries for various locations in the state.
Of course these proposals are a skeleton of what would ultimately need to take place but they are talking points upon which a new, fairer, less odious policy for education funding can be formulated.
Finally, some people have chided me for proposing such sweeping changes. They believe that this system is so entrenched that it would be impossible to scrap. Perhaps I am naïve or idealistic but I know a better system can be created and implemented. I know that there would be problems initially and that it would take some time to work out the kinks. I do not believe that because it would be difficult that we should not do it. That kind of thinking would have thwarted most advances in human society, science and technology.
In my next blog entry I will explain how a well designed curriculum is a better way of assessing whether state standards are being met than endless standardized tesing.
Michael Raucci
"We spend so much money on the military, yet we're slashing education budgets throughout the country. No wonder we've got smart bombs and slow children.”....Jon Stewart
“In this world nothing is certain but death and taxes.” Benjamin Franklin
If there's one thing that everyone in New York agrees on, it’s that their property taxes are too high. I've never met anyone who complained because they wanted to pay more.
There are two types of property: real property and personal property. Real property includes land and any fixed improvements to that land including homes, barns, tennis courts and so on. Personal property would essentially be any other belongings. In New York State, personal property is typically not taxed after the initial consumption tax at the time of purchase. Real Property Taxes raise revenues primarily for schools and local governments while income and consumer taxes are often designated for state and federal government use, though some of that money does also filter back to schools and local governments.
In the current system, the majority of real property taxes go towards education. I propose that New York State abandon the Real Property Tax as a method of funding education. In this blog, I will expose the flaws of this tax, provide an argument for its abolition and outline a more sensible system to replace it.
First lets understand why education must be a publicly funded program and why that public funding must be distributed across the entire population. Education serves two purposes. It allows individuals to explore and expand their hopes, dreams, and potential. It also serves a greater communal good which I will describe later. All Americans contribute towards the educational system because it benefits us all. We all were products of it at some point in our lives and its continuous production of skilled and intelligent graduates creates a society that is capable of sustaining and funding a high quality of life for all citizens. Some people feel that because they do not have children or because their children go to private schools for which they pay an additional tuition they should not have to pay school taxes. This is a faulty argument. What many people don't understand, and it’s a bitter pill to swallow, is that you do not pay taxes to send YOUR children to school. You pay taxes to support the public school system, which exists to educate all American children regardless of race, color, creed, religion or socioeconomic status. If the government builds a new bridge or a new highway you pay for it in your taxes whether you use it or not. It’s a tax that everyone (or in the case of school taxes property owners) pays; people with 10 kids and people with no kids, native Americans and immigrants. It’s a public benefit program which ultimately benefits all of us because an educated public possesses the skills to work, contribute to society and pay taxes which assist in sustaining our culture and society.
Below are some of the flaws and negative effects of the current system of funding public K-12 education:
1) The current Real Property Taxation system pits the old against the young. Because Real Property Taxes are primarily utilized to fund grade schools (K-12), the money that is collected benefits children and adolescents (5-18 years of age). They however, do not pay these taxes. The people who own homes, farms, land, and businesses do. When taxes become an excessive burden to members of the community, they seek to redress the situation. The only recourse they have is to vote NO represent a system gone wrong, wasted tax dollars, and wasted lives. Of course, this isn’t an accurate representation in most cases, but when people are struggling to save their homes, their savings, or their livelihoods it is hard to differentiate. Young people begin to feel similar misgivings about the older taxpayers in the community when budgets are voted down and programs are cut from the schools. Not only can palpable acrimonious divisions develop within the community but the respect and understanding between generations is lost. Communities are torn. A good example of this misunderstanding and acrimony took place in the Pine Bush School District last year. The school board and superintendent presented a budget of approximately 99 million. This budget was approximately the same as the prior years and included many cuts including staff reductions. If this budget did not pass then a state mandated contingency budget would be put in place. Utilizing state formulas the contingency would be more than the proposed budget. In other words, if the budget were not passed the taxpayers would have to pay more. This vote was a no-brainer. No one should have voted NO and yet in the final tally more than 800 people voted NO; they voted to have their taxes increased for no reason.
2) The Real Property Taxation system creates animosity between educators and taxpayers. When taxpayers complain of the financial strain of property taxes the focus of their ire is often the teachers. Why? Because teacher salaries and benefits comprise the bulk of the cost of education and consequently of the school budget. Some community members begin to visualize that money is being taken from their pockets and put into the teachers’. In most European and Asian nations, where educational standards and achievement often exceed those in the United States, teachers are highly respected and revered members of the community. Paying teachers well makes perfect sense if one wishes to live in an advanced high quality of life country. The problem is that the communal payoff for those teacher salaries is not realized for many years later when those well-educated students become productive members of the society. Most people do not have the foresight to understand that the securing of the best and brightest to teach today’s youth costs money, money enough to lure them away from even higher paying industrial or private sector jobs. Better teachers yield better students, which yield a better society with a higher quality of life. But when the money to fund students’ education (via teachers) comes from their neighbors and when there is financial pain associated with this, anger sets in towards the recipient of the money. That recipient is seen as the teachers.
3) The Real Property Taxation system acts as a disincentive to home and business owners to improve their property. If someone improves their property then their assessment goes up and they pay more taxes. Because of this many people refrain from improving their homes or even worse avoid utilizing the building inspector when making changes to their homes in an effort to limit their property tax exposure. When buildings are erected, electrical wiring and plumbing modified, etcetera without the building inspectors approval process, the assessors re-evaluation of the property is not engaged and the assessment remains the same, but because the building inspector is not involved, shoddy and hazardous workmanship can result in dangerous living and working environments. I have also heard home and business owners lament that though they had the means to improve their homes and business facilities they would not do so because of the lifetime of tax increases it would mean. We should want our town to look good and for our homes to look good and for our neighbors’ homes to look good. There should be nothing that stands to make someone feel otherwise, but that is what the real property taxation system does. Instead, there should be incentives for people to improve their properties because when a neighbor improves their property it raises the value of all the homes around them and when a neighbor leaves their home in disrepair it reduces the value of all the homes around them and of the community in general. Improving ones homes, business and community imparts a sense of pride and beauty. Why would we deny ourselves this by retaining a system that disincentivizes property improvement.
4) Property taxes which fund schools are anti-family. Families with school aged children who move into the community are viewed as new financial burdens by the existing community. It costs an average of about $10,000 to educate one child. Imagine a family with four school aged children moves into a community and into a home whose assessed value results in $10,000 in school taxes. Their tax dollars only cover the expenses of one of their children’s schooling. The other three children’s educational expenses must be picked up by the community at large. In effect, that one family causes everyone else’s taxes to increase. The current system causes dissention between people with children and people without children or people whose children are grown. Quite simply the people without children may view those with children as increasing their financial hardship. In some localities, town boards have enacted laws whose hidden purpose is to limit the number of school aged children entering the community and the school district because each additional family with children rarely contributes more in property taxes than the additional tax levy their children create. These laws often focus on reducing multi-family dwellings and non-senior rental properties because they attract lower income families with school age children.
5) The current system pits neighbor against neighbor. If one believes their taxes are too high they can grieve their assessment. In order to properly grieve one’s assessment, they must find comparable homes usually in the same or a similar neighborhood whose assessments are lower. This should justify their desire to have their own assessment lowered. This process can result in confrontation between the griever and the owners of the homes the griever uses as comps because the assessor can either grant a reduction or decide that the griever’s assessment is in fact correct and that the comps' assessments are too low, resulting in future assessment increases for the owners of those homes. This unfortunate tax increase for the comp owners is a direct result of the original griever pointing their homes out to the assessor. Some places fortunately have laws, which restrict assessors from increasing an assessment to only when improvements are made, a sale takes place, or a town wide Re-Val is undertaken.
6) The Real Property Taxation system acts as a deterrent to industrial and commercial growth. This could be the most important reason for dismantling the current system. High school taxes act as a deterrent to commercial enterprise setting up their businesses in New York State. A purely ends motivated business will go to the location that allows it the least expenses, which is often out of the state or country. A lack of business results in a lack of jobs, which results in a reduced ability to pay property taxes, which do not go down with a person’s income. When businesses are seeking to locate in New York there is extreme competition between communities that are willing to offer incentives in the form of reduced tax burden causing communities to sacrifice tax dollars for the prospect of local job creation.
7) A Property tax is a regressive tax that impacts the poor more than the rich. A regressive tax is one whose effective rate decreases as the amount to be taxed increases. Regressive taxes impact lower income families more because the tax accounts for a higher percentage of those peoples’ income than higher income families (Progressive taxes escalate along with the income of the payee). Typically, a middle class person with a family ties up their wealth in a home. If a person’s entire net worth is tied to their home and that home is assessed at $300,000 and the real property tax rate is 5%, then they must pay $15,000 in taxes. This accounts for 5% of their net worth, which must come from minimal liquid assets. A wealthier person who owns a $600,000 home but whose net worth of $6,000,000 (which is primarily secured in interest bearing vehicles) pays the same 5% property tax rate. If they were to pay the same 5% tax on their property then they would pay $30,000 which is only 0.5% of their net worth and which comes from their sizeable interest bearing liquid accounts. In this realistic scenario, the poor person who lives in a home with half the value of the wealthier person pays property taxes at a rate 10 times as high when measured as a function of net worth. To add to the insult, the rich person’s home is valued at twice that of the poor person’s. According to itepnet.org low income families paid 3.0% of their income in property taxes in 2002, while middle-income families paid 2.4% of their income and the wealthiest taxpayers paid 0.8%. A fairer system would be income based which is progressive.
8) The Real Property Taxation system causes inequity between school districts. Communities in which wealthier people have congregated will raise more money for their schools than those in poorer communities. Why should poor and middle-income families have to sacrifice more in order to provide an education for the children in their community? This problem is worsened when one considers the long-term effect of this funding disparity. Wealthier districts will be able to pay teachers more and therefore are likely to attract the most qualified applicants. School facilities at wealthier schools can far out weigh those of cash strapped districts, boasting science classrooms that rival pharmaceutical laboratories or computer labs with the newest technologies. This disparity often allows those students in the wealthier districts to excel academically beyond the students in the poorer districts. Taken one step further, this can increase the societal gaps between low, middle and high income families as those that receive the more privileged education from the wealthier schools will frequently outstrip the less privileged in college admissions and ultimately job acquisition. The system maintains, even solidifies the class hierarchy.
9) The current system promotes cronyism. The valuation of land, homes, and other improvements is not an exact science. There is much latitude in an assessment and whether consciously or not assessors are effected by their friendships, biases, social and financial debts, and political affiliation. Anyone who has ever attended a grievance hearing is well aware of this.
10) Localities that host significant numbers of large tax exempt organizations are at a disadvantage. Properties used for religious purposes, parks, military facilities, and government buildings are at a great disadvantage in school funding with large tracts of land and property removed from their tax rolls.
11) Property taxes are not responsive to variations in income. A person who loses their job will come home and still be responsible for the same unchanged property taxes despite a significantly reduced ability to pay them. If the school taxes were income based then when the person lost their job and their income was reduced so too would their school taxes be reduced. Income taxes are much more sensitive to a person's ability to pay. They are progressive. Property taxes are especially difficult on the elderly who after retirement find themselves property rich but cash poor.
The Real Property Taxation system came into existence in the United States when the country was still essentially a feudal society. There were few land owners and they were all rich. With farming and burgeoning industrialization, land could and often was used for profit. Taxing land made sense at the time as land and other property values were a good reflection of a person’s wealth. Nowadays, property ownership is by no means limited to the rich. In fact, the foundation of the American Dream is homeownership. Many Americans currently make mortgage and property tax payments, which exceed 50% of their net income leaving very little for other bills, food, and other necessities. We no longer live in an agrarian society and it is rare for people today to generate income from their residential property. Raising a person’s taxes as the value of the property increases makes no sense because as the value of the property increases, there is no increased income realized by the owner. An income increase is only created when the property is sold and it would be sensible to tax that profit. As property taxes increase there is no guarantee of a commensurate income increase to offset the money lost. In a bad economy, the real property taxpayer is hit with a double whammy. As the economy goes down so do alternate funds for public operations, therefore property taxes go up despite the property owners decreasing ability to pay them.
Recommendations:
1) Abolish the property tax as a means to fund education. In fact, all property taxes should be limited to sales or should be based upon a linearly increasing rate above a certain threshold (e.g. The property tax wouldn’t be engaged until a property value exceeded $500,000. At the threshold it would be a minimal tax defined by a small percentage, lets arbitrarily say 0.1%. As the value of the home increased so too would the property tax percentage. At a value of $1,000,000 perhaps the tax would raise to .2%. There would be prorated percentages in between.)
2) Institute a new state income tax whose sole purpose is to replace property tax revenue for the funding of schools. I do not have the data to determine what that income tax rate increase would be but I have heard that a 1.0-2.0% state income tax increase would negate the contribution that currently comes from property taxes. This would be far fairer because the amount paid would increase with increasing net wealth; a progressive tax. It would make sense if this tax were applied prior to any deductions or at least prior to most deductions. This would eliminate the common and unscrupulous tactic of large corporations utilizing tax law loopholes to avoid taxation. Finally, I would recommend that this money be in a lock box fund. This School Funding Money should be treated just like money collected for social security, which cannot, by law, be touched by Congress and utilized for any other purpose.
3) Another state income source could be a point of purchase Internet sales tax. Anyone who makes a purchase on the Internet from New York State would pay the typical New York State sales tax. The tax would have to be on the New York based consumer so that they paid the tax no matter where the product was coming from. If you only taxed products that originated in New York it would make New York businesses less competitive.
4) The state needs to stop playing games with lottery money. When the lottery was introduced it was touted as the savior of education. All the additional money would be funneled into the state's education budget offsetting rising property taxes. This is not exactly what occurred. Albany bureaucrats pulled a bait and switch. When lottery money started to roll in, they began to pull money that was originally budgeted for education away. The net effect was that education saw no increase in funding. The same amount of money simply came from a different source. Education needs to be budgeted for properly. Lottery income should be nothing but gravy. No more bait and switch.
5) Superintendents of Schools, School Boards, and Town and City Government officials need to band together and demand these changes. The Association of Towns which takes place every year in NYC would be an excellent venue to begin the process.
6) As part of state revenue collection modification, the state will need to create a formula whose implementation would be overseen by an independent committee to determine how money will be distributed to school districts. This will result in a more equitable distribution of education funds than the current system. There will be a cascade of changes that will occur, some of which might not initially be apparent. One change will be in how teacher’s unions negotiate their contracts. I would recommend that individual teacher’s union unite under the umbrella organization NYSUT. Under this system NYSUT would negotiate on behalf of all teachers in the state. Variances in salaries would be required to make up for differences in cost of living. These would be based upon formulaic multipliers much like the ones in place for doctors who bill the NYS Workers Compensation System. In this system different areas of the state are rated based upon cost of living differentials and assigned a multiplier. A base fee is established and different multipliers are used to determine the fee to be received by doctors from different areas (e.g. The base fee for a physical therapy office visit might be $50. If the multiplier for Orange County was 0.9 and the multiplier for Manhattan was 1.2 then the Orange County therapist would receive $45 and the therapist from Manhattan would receive $60). A similar system could be set up to determine teacher salaries for various locations in the state.
Of course these proposals are a skeleton of what would ultimately need to take place but they are talking points upon which a new, fairer, less odious policy for education funding can be formulated.
Finally, some people have chided me for proposing such sweeping changes. They believe that this system is so entrenched that it would be impossible to scrap. Perhaps I am naïve or idealistic but I know a better system can be created and implemented. I know that there would be problems initially and that it would take some time to work out the kinks. I do not believe that because it would be difficult that we should not do it. That kind of thinking would have thwarted most advances in human society, science and technology.
In my next blog entry I will explain how a well designed curriculum is a better way of assessing whether state standards are being met than endless standardized tesing.
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