Local funding of schools: The property tax and its alternatives

INTRODUCTION Th e property tax has long been the primary local source of funding for schools and, along with state aid, provides the lion’s share of total resources for schools. In recent decades, though, the property tax has come under siege as a source of revenue for schools. Th e principal charge has been that, since property wealth is unequally distributed across school districts, reliance on this source of revenue results in unacceptable differences in property tax rates, property revenues per pupil and, most importantly, spending per pupil across districts. Th e property tax is also criticized for being inequitable, ineffi- cient, and complex. Dissatisfaction with the tax has grown as evidenced by the number of attempts to constrain spending and limit access to taxes, including the property tax (Downes & Figlio, this volume). 1 Among the possible explanations for the declining support for property taxes are demographic shift s in the form of a rising elderly share and a declining school-age share of the population. In this chapter, we examine the various charges against the property tax as a means of funding schools and compare it to alternative sources of revenue such as sales and income taxes.