Alternative Forms of Taxation to Achieve Equitable Levels of Educational Expenditures

INTRODUCTION quality remain unchanged. If other sources of taxation are used they also Pressures are increasing for reforms in financing must be evaluated relative to the concepts of equity of local government services. At the local level, the and regressiveness on taxpayers. One frequently property tax is a major source of concern.! Two mentioned alternative to the property tax is a local major charges leveled against the property tax are (1) income tax. Local income tax may be applied as that the property tax is regressive and (2) that simply a percentage of the state income tax payments financing local government services through the or, in a more restricted sense, it is applied as an property tax leads to inequities in services received. earnings tax. The charge that the property tax is regressive stems from the fact that it is a tax on wealth and not on income. The amount of real property owned by a OBJECTIVES person is not necessarily proportional to his ability to pay taxes. Several studies [2, 12, 17, 18] have shown The overall objective of this research is to that property taxes are regressive; i.e., that analyze equity with respect to taxpayers and school low-income families pay a greater percentage of their children. First, it attempts to compare the income for public services than do middleand regressiveness on taxpayers of property versus local upper-income families. income taxes. Local services received are assumed to Another major source of dissatisfaction arises be the same regardless of tax source. Level of services from the fact that the geographic location of the delivered, however, may be related to measures of tax property tax base does not always correspond with incidence. The level of services provided is different the location of the need for property tax-financed in urban and rural areas, but so is the relationship of services. Recent court decisions have ruled that property to income levels. Thus, a second'objective is disparities in the property tax basis of school districts to determine equitable levels of service in rural and result in unequal educational opportunities. urban areas and measures of tax incidence in these Currently, there is a great deal of interest in areas when services are provided via property or relieving the burden of the property tax. Several incometaxes. states have reduced property taxes for selected groups, the elderly, homeowners and farmers. Other PROCEDURE states have offered more widespread relief of property taxes. In any case, lower revenues resulting We approach the question of equity from two from less reliance on the property tax must be made points of view. First, our research identifies equity up from other sources if public service levels and for taxpayers as the supply and demand equilibrium