Fairness in school funding

The Reader’s Ben Joravsky is one of many in the media making a big hoopla about how Chicago Public Schools spend a lot less per pupil than New Trier High School does ($10,049 vs. $20,811, according to Joravsky).  Leaving aside the question of whether more money results in better education, some basic facts seem to be getting lost here.

(1) Comparing Chicago’s k-12 district to New Trier’s high school district isn’t meaningful. High schools always spend more than elementary schools, per pupil. I’m not going to try to explain why, tho it seems high school teachers are paid better than elementary school teachers. and maybe more specialized equipment and smaller classes are needed.

(2) Compared to most other districts, Chicago is wealthy. Since advocates say the main reason for the disparities is that some districts have a bigger tax base (more assessed value of real estate per student) than others, we’d think that Chicago’s tax base must be pretty poor. Sure, New Trier’s tax base is more than seven times as much, per student, as Chicago’s. That leaves plenty for them to share with the elementary feeder districts.

But how does Chicago compare to the 394 other K-12 districts in Illinois? Chicago’s $165,380 per student is higher than 92% of the other K-12 districts. And that’s even after allowing for the scandalous TIF extractions that have Joravsky rightfully concerned. (Check my work with the figures from here. Look on the left side under “file type” and download the xls spreadsheet.) Most of the K-12 districts have a tax base of less than $100,000/student.

(3) Disparities of local tax base can be remedied without raising income or sales taxes. If for some reason it’s necessary to increase state funding for local schools, that can be done without raising the income tax or sales tax. Wealthier districts could be required to “donate” part of their revenues to poor districts. Or the statewide real estate tax can be resurrected. Ideally, it would exclude improvements from the tax base.

GAO on Funding Infrastructure

No great surprises in the new Gov’t Accountability Office report on: PHYSICAL INFRASTRUCTURE  Challenges and Investment Options for the Nation’s Infrastructure.  (Summary, full report).  Roads, bridges, dams, railroads, airports etc are decaying and not keeping up with “demand,” and existing funding methods are proving inadequate.   Is there a cheaper way to meet the needs? The report does not say.  Is it worth spending what it costs to update the facilities? Not discussed. And perhaps most importantly, is there a way that the owners of land benefiting from infrastructure improvements could be made to pay for them?  Well, one sentence recognizes some approximation of the possibility:

A variety of taxes have been and could be used to fund the nation’s infrastructure, including excise, sales, property, and income taxes. (p. 15)

That’s all.

Racism and land value taxation

Prosper Australia exec Gavin Putland has written an insightful analysis (“Still on the Mountaintop”) of how a policy of taxing productive activity almost guarantees, under American conditions, that blacks will suffer economic discrimination and be overrepresented among the poor and unemployed. The link is thru NAIRU, which requires a substantial level of unemployment in order to prevent ruinous inflation.

“full employment” means enough unemployment to cause enough wage restraint to give stable inflation. So we’re living in a system of enforced failure. A percentage of people have to be unemployed, and therefore, at the boundaries of unemployment, another percentage of people have to be underemployed or intermittently employed or precariously employed. In other words, the economy is being run in such a way that a certain percentage of people have to be losers.

He explains what seem logical reasons why Africian Americans, rather than other minorities or the entire labour force, bear this burden. The solution is to tax “land-like assets” instead of “house-like assets” and the work that goes to produce them, resulting in increased employment opportunities with less inflation, among other benefits. The piece includes detailed explanation of why even landowners will be better off under this reform.

Even experienced Georgists will benefit from reading Putland’s accessible explanation.

NAHB report endorses Land Value Tax

A new report prepared by a consultant for the National Association of Homebuilders reviews dozens of strategies which have been proposed or used to promote affordable housing.  It points out that an increased tax rate on land values, balanced with decreased taxation of improvements, reduces real estate taxes for most homeowners, while encouraging owners of vacant or underused land to get their land developed, often increasing the supply of housing.

The report also notes that it costs virtually nothing to tax land at a higher rate than improvements.  Examples cited include Harrisburg and Allentown, PA.  Information is from Josh Vincent of the Center for the Study of Economics.

In  Illinois, the Cook County Board could pursue a similar strategy using existing authority to tax land and improvements as two different classes of real estate.  As previously discussed here, the Assessor could take a big step in this direction by just valuing vacant land as prescribed by existing laws and ordinances.

Ricardo's Law: The Video

Fred Harrison now has a youtube video version of his Ricardo’s Law, which explains how a “progressive” income tax actually traps the poor and benefits the rich. Mairead Sullivan, Ben Kettlewell, Ross Ashcroft, Ben Holland, and Megan Campbell are also credited on the project.

If you only have 8 minutes to spend learning about this stuff, or as an introduction, the video is recommended.

update Feb 26: The youtube link is changed above.  Also there is an alternative link.

Transit funding will cost >80,000 jobs

That’s the estimate I came up with in the revised and quite enhanced version of HGS Research Note 5a. I’m using parameters estimated several years ago in a study of the Washington, DC, metropolitan area. Maybe the actual number here would be a lot more; I wish someone would do the analysis. This loss is expected to occur by 2014; further losses would follow.

If RTA really needs the funding, I estimate we could do it with a land tax that would cost the typical homeowner maybe $40/year, with renters essentially paying nothing. For $290/year, the homeowner could do away with all transit taxes, and fares too. No jobs would be lost; some would be gained.

By comparison, Chicago Metropolis 2020, in their surprisingly thoughtful study Time is Money, estimate that fully funding all the transit spending that RTA wants, plus some “smart growth” changes in land use arrangements, would add 22,307 jobs by 2020. They do not discuss how the funds would be obtained, although the study does note that a doubling of gasoline prices– which might be achieved thru taxation– would have great benefits for transit use.

We'll pay $141,000/job you "create"

Or, to look at it differently, we’ll give you $353,000 per acre of land you use.  That’s what the City of Chicago is giving ” ML Realty Partners LLC” to build a “distribution center” at 401 N. Cicero.  Now, all I know about this is what I read in the papers, but according to the Jan 20 Tribune article, $10.6 million in TIF money is going to “create” 75 jobs on 30 acres.  This site is practically adjacent to the Green Line Cicero station.  Why did nobody want to develop it before? (My guess is that it’s because the landowner was holding out for TIF money.)  And how can we justify less than 3 jobs/acre on a transit-served site?  This sort of thing might be suitable for Will County, not the west side of Chicago.  Is there nothing more productive that can be done with this land?

Ending "a sea of indebtedness"

Thanks again to Dan Sullivan of Saving Communities for locating Henry George’s advice on preventing excessive debt (government, corporate, individual) without constraining economic growth. George’s straightforward solution: take government out of the business of collecting debts. People could still lend and borrow money, but you can be sure lenders would be careful, relying heavily on the reliability of the borrower. As for public debts, if the government needs money for a defensive war or public improvements, let it levy taxes to collect what’s needed. The logic of this becomes clear when one reflects that in wartime everyone should sacrifice, the rich no less in proportion to their assets than the rest, and that public improvements have the effect of increasing land values and therefore generate their own financing.

The article Sullivan quotes is from The Standard, Feb 11, 1888, and apparently isn’t posted in its entirety anywhere, so I reproduce Sullivan’s extensive extract below. Continue reading Ending "a sea of indebtedness"