Lloyd Constantine

A better way to fund schools while lowering property taxes

The Weekender column of Feb. 3 explained why the property tax cap proposed by Governor Cuomo in his State of State speech, and roundly applauded by the legislature, would be a grievous mistake for Chatham and all of New York state. It would set New York on the same disastrous path traveled by California after the passage of the infamous Proposition 13 tax cap. Soon after Prop 13 was enacted, California’s public schools, then widely considered the finest in our nation, rapidly deteriorated. That Governor Cuomo, and indeed Governor Spitzer when he had the baton, would make proposals similar to California’s with the resulting educational carnage so fresh and clear is disappointing but not surprising. Both parties have all but eliminated the former ability of elected officials to resort to progressive income taxation as the major source of funding for most of the things we expect government to provide.

Former Republican Congressman David Stockman, who served as President Reagan’s first budget director, put it succinctly to National Public Radio recently when he observed “…Republicans … made revenue raising toxic. And have campaigned, you know, from one end of the land to the other on the evil of tax raising, even though anyone with common sense knows that you have to pay your bill sooner or later and if you’re not going to cut spending, which the Republicans have been unwilling to do to date, then you’re going to have to step up to the plate and face the music and tell the people, the taxpayers of America, that we have to raise more revenue. Now, both sides are just ducking the issue. They’re copping out and they’re lying to the American public…” Democrats are no less to blame. Governor Spitzer’s two executive budgets raised spending, while proudly proclaiming that they contained no new or increased taxes.

Last December, President Obama could have raised federal revenue by roughly $3.7 trillion in a decade by doing — nothing — and just letting the Bush 43 tax cuts expire. No vote of Congress was required and had Congress rebuked the President by reenacting the tax cuts or merely those affecting the 98 percent of American families with annual income less than $250,000, the president’s veto would have been safe from override. Then, the wealthiest people in America would have simply returned to marginal tax rates of 36 percent and 39.6 percent, which prevailed during most of the Reagan, Ford, Carter, Bush 41 and Clinton presidencies. That would compare with the 91 percent marginal rate which prevailed during the presidency of Dwight David Eisenhower — when much of the nation’s post-ware infrastructure, including our interstate highway system, was constructed with that tax revenue.

There are many good reasons to shift the primary source of funding for public schools from local property taxes to statewide income taxes and only one reason not to — the bad one (discussed above), which involves demonizing taxes and those who would raise them even for the most desirable and broadly supported purposes. As the primary source of school funding, property tax is inherently unreliable, unfair and often regressive. Property values, as we have recently seen, are now subject to boom and bust fluctuations, which can play havoc with revenue projections and the ability of leveraged homeowners to pay their property taxes.

Property tax is often regressive because people of low- and modest fixed-income pay taxes based on escalating property values, escalating tax rates or both. Reliance upon property tax for school funding also deprives children in low revenue areas of the educational resources available in high property value parts of the state or in places like New York City, where the commercial tax base is so strong that homeowners pay a tiny fraction of the property taxes paid elsewhere. In the ongoing debate over Governor Cuomo’s initial tax cap proposal, the watered down version contained in his 2011-12 executive budget and the diminished state aid for schools also contained in that document, you will hear frequent cries of foul from representatives of the Campaign for Fiscal Equity, which five years ago won a landmark ruling from the state’s highest court requiring equalization of state support for schools in inner cities (principally New York City) with that provided to wealthy suburban areas.

There are many other cogent arguments and legal precedents which wisely conclude that the quality of public education should not suffer in poor areas — both inner city and rural — because of a deficit in local tax revenue. All these authorities lead to the conclusion that funding schools from state income tax revenues is far more reliable, consistent and equitable and comports with the mandate of court rulings that Governors Pataki, Spitzer, Paterson and Cuomo all paid lip service to, but in reality flouted.

Income tax is paid by people with current actual income, not by people with low- or modest income who are house-rich and who often must go without necessities to pay their taxes or sell their homes to avoid incurring them.

As David Stockman noted, both political parties “are just ducking the issue. They’re copping out and they’re lying to the American public.” It doesn’t have to be that way. The people can instantly stop rewarding these cop outs and demagogues with their votes when they promise “never ever” to raise taxes and target the increasingly rare and honest office seekers who observe that it may or will be necessary to do just that.

People should start doing that now and tell their representatives that what is needed is not a property tax cap but a return to the type of progressive income taxation that provided the revenue for the “American Century” and can help assure that we continue to perfect our union in the 21st.