Grating, I Mean Grading, Taxes

Not all taxes are created equal. Are some “better” than others, or more equitable, or fair? I have selected six criteria in order to compare different taxes in California, from the perspective of funding public education.

Criterion 1: Adequacy. This criterion is about how much revenue is generated by the tax. It addresses whether or not the tax is able to draw in enough money to run the school system.

Criterion 2: Equity (progressive, proportional, or regressive). This criterion is about whom the tax collects money from and how much it collects from different individuals. Proportional taxes collect the same percentage from each person. Progressive taxes collect a higher percentage from those who are more able to pay (sometimes referred to as “ability to pay” (Brimley, Verstegen, & Garfield, 2011)), and regressive taxes collect a higher percentage from those less able to pay (the poor). Though one hopes it would be obviously unfair to collect a higher percentage from the poor, we will see below that these taxes still exist.

Criterion 3: Ability To Be Understood (not overly complex). Ideally, all people should be able to figure out for themselves, in advance, the amount of their tax bill. If people understand how their tax and their neighbors’ taxes are calculated, they can plan ahead for the tax bill, and they will be more likely not to suspect the tax of being unfair.

Criterion 4: Ability To Funnel/Direct Money Where It Is Needed. Some taxes provide funding only for a specific expense. Though this reassures taxpayers that their money will not be “wasted” on “frivolous” expenditures, it creates extra expenses in the form of monitoring/accountability and paperwork, and it ties the hands of districts when some programs are overfunded and others are underfunded. Compromise, flexibility, and creativity are often necessary to balance budgets in lean years, and earmarked dollars hinder all three.

Criterion 5: Unintended Consequences. Some taxes have an effect beyond collecting revenue. Some people fear that taxes that are too high discourage business or encourage business people to move their companies elsewhere. Other taxes, like the lottery, have social consequences discussed below.

Criterion 6: Predictability. It is important for those in state and local government to know how much money will be collected and available to spend.

This blog post focuses on the following four tax types: income, sales, property, and lottery.

Income Tax. This is the most progressive of the taxes examined here, and therefore ranks highest based on criterion 2: Equity. Income is taxed at varying rates, based on the amount an individual, family, or corporation makes. California’s seven personal income tax brackets range from sound 1 to 11% (Brimley, Verstegen, & Garfield, 2011). The progressivity of the income tax lowers its understandability rank, as what counts as income and what is exempt is a challenge for the average person to understand, tally, and, though one hopes never to be required to, document.

Sales Tax. This tax is perhaps the easiest to understand, as it is “simply” a set percentage added to purchases. In terms of criterion 3, understandability, only the lottery ranks higher. Sales tax rates in California vary from county to county, complicating things somewhat (I do not even know the rate in my neighborhood).

Sales tax is regressive if it taxes necessities such as food and other necessities (Brimley, Verstegen, & Garfield, 2011), and though some grocery store purchases are exempt in California, not all are. Further evidence that sales tax is regressive is the fact that the poor tend to spend all of their income each month, while the rich save much of theirs. Finally, as sales tax varies from region to region, those with the most time and ability to comparison shop and travel can somewhat circumvent this tax.

Sales tax, again because it varies from place to place, has the unintended consequence of sending some commerce elsewhere. Oregon has no sales tax, so those who can often try to make purchases across the border.

Sales tax is the least predictable (criterion 6) of the taxes, as it changes from year to year based on the overall economy.

Sadly, though this is not the simplest tax to understand, and is regressive and unpredictable, it is the greatest source of revenue (criterion1: adequacy): one third of state tax revenue is supplied through this channel (Brimley, Verstegen, & Garfield, 2011).

Property Tax. There are three types of property tax: real, personal, and special bond. Historically, property taxes used to be the largest source of school funding. Now, though they provide most of the local funding, state funding still provides more overall.

Real Property. Real property refers to land and buildings owned by both individuals and corporations/businesses. Property taxes seem to be unpopular among all groups: the rich claim they own more expensive homes, so are taxes more, the middle class claim they spend a greater percentage of their wealth on their home, so they are taxed more, and those who do not own a home feel that their landlords pass property taxes on to them in the form of higher rent. Though one could say a tax that everyone hates might actually be equitable, it is said by some to be the most regressive of taxes (Brimley, Verstegen, & Garfield, 2011) because of the ability of the rich to funnel their wealth into investments other than their primary home, often avoiding significant taxes. Also, California’s Proposition 13 restricts inflation in assessments so that neighbors with similar homes often receive tax bills differing by a factor of 10 depending on when the home was purchased.

Personal Property. Personal property includes things people and businesses own (both tangible things like cars, jewelry, and machinery and intangible things like cash, bank and stock accounts) that, unlike real property, are easily movable. Taxing personal property makes property tax more equitable, overall, but as always, those with the most money also have the most incentive and resources to hide their property from such taxes. They have also tended to be successful at lobbying to dissuade lawmakers from pursuing personal property taxes aggressively.

Special Bond Election. Sometimes, a local school board will ask the voters (via an election) to allow the district to borrow money for a capital outlay (to purchase land or construct or modernize buildings), the loan to be paid back via a property tax levied over the next several years or few decades. This tax ranks high on the adequacy and directability scales, medium on the understandability scale (though voters usually understand what the money is for, they often do not understand the amount of interest that will eventually be paid, and when/if they find out, they are often horrified), and low on equity, as all residents get to vote, but only property owners have to pay.

The Lottery. Though easily understandable, the lottery, as discussed in my previous blog post, has perhaps the most serious unintended consequences: promoting and normalizing gambling among young people. It also provides the smallest amount of revenue (about 2% of the total California school budget) and is the least flexible in terms of funneling money where it needs to go: mainly textbooks/instructional materials. Finally, as a regressive tax, targeting the poorest neighborhoods with the highest concentrations of ticket sales institutions (see studies referenced in my blog post below), the lottery ranks lowest of the four taxes discussed here.

References

Brimley, V. R., Verstegen, D. A., & Garfield, R. R. (2011). Financing Education in a Climate of Change (11 edition.). Boston: Pearson.

Kundu, P. V., Pilver, C. E., Desai, R. A., Steinberg, M. A., Rugle, L., Krishnan-Sarin, S., & Potenza, M. N. (2013). Gambling-Related Attitudes and Behaviors in Adolescents Having Received Instant (Scratch) Lottery Tickets as Gifts. Journal of Adolescent Health, 52(4), 456–464. doi:10.1016/j.jadohealth.2012.07.013

http://www.ppic.org/main/publication_quick.asp?i=1040

Wiggins, L., Nower, L., Mayers, R. S., & Peterson, N. A. (2010). A geospatial statistical analysis of the density of lottery outlets within ethnically concentrated neighborhoods. Journal of Community Psychology, 38(4), 486–496. doi:10.1002/jcop.20376

Proposition 20: changes to California lottery allocations for instructional materials

The California lottery was created in 1984 as a way to avoid raising taxes while increasing funding for schools. Over the years, as revenues from the lottery increased, so did public concern for how lottery money was spent in schools. The Cardenas Textbook Act of 2000 (Proposition 20 on the March, 2000, election ballot) sets the base lottery revenue as that collected in the 1997/1998 fiscal year, and allocates 50% of any growth beyond that specifically for instructional materials (mainly textbooks). This initially provided an additional $41.5 million, statewide, for K-14 instructional materials.

Arguments for Prop 20 focused on polls of teachers (over 50% reported a textbook shortage) and residents (over 80% supported using lottery money to purchase textbooks), as well as data showing that California ranked 47th among the states in per pupil textbook spending. Arguments against were that lottery funds fluctuate from year to year, making it harder for local districts to plan in advance, and that this change takes away local control and autonomy.

While $40 million is a great deal of money, in terms of adequacy, it amounts to very little once it is divided among all of the local schools districts. For my district (Glendale Unified), it would cost over $1 million just to purchase new science textbooks for high school science classes. With 87 high school districts and 330 unified districts in currently in the state, the Prop 20 funding could provide these new science textbooks once every 10 years. However, there are students in grades K-8, and also in 13-14, who also need science textbooks, and of course science is only one among many disciplines. (The math here is very approximate, and Glendale unified, while neither the largest or the smallest district, is likely not a statistical average of all districts. These numbers are intended to show, generally, that Prop 20 cannot, by itself, fund instructional materials.)

Perhaps more concerning than the adequacy issue is the equity issue. Lottery revenues are calculated statewide, so a local region spending more on the lottery will receive the same amount as a region spending less. Yet, studies show that the poor participate in the lottery at significantly higher rates, meaning that, overall, those who are socioeconomically disadvantaged are paying not just a greater percentage of their income, but also a greater amount, than those who are not disadvantaged and those who are privileged. Further, stores selling lottery tickets are clustered in high-minority neighborhoods. Prop 20 and the lottery in general, based on this standard, is similar to a regressive tax.

An additional concern is that, with the legalization of gambling, rates of young people gambling have increased. It is not uncommon for children, too young to purchase tickets themselves, to receive them as gifts. Though this may prove “fun” or “exciting,” it has also been linked to problematic gambling later in life.

When something seems too good to be true, like funding textbooks without increasing taxes, it often is.

References:
cde.ca.gov
California Taxpayers Association

Ariyabuddhiphongs, V. (2011). Lottery Gambling: A Review. Journal of Gambling Studies, 27(1), 15–33. doi:10.1007/s10899-010-9194-0

Kundu, P. V., Pilver, C. E., Desai, R. A., Steinberg, M. A., Rugle, L., Krishnan-Sarin, S., & Potenza, M. N. (2013). Gambling-Related Attitudes and Behaviors in Adolescents Having Received Instant (Scratch) Lottery Tickets as Gifts. Journal of Adolescent Health, 52(4), 456–464. doi:10.1016/j.jadohealth.2012.07.013

Wiggins, L., Nower, L., Mayers, R. S., & Peterson, N. A. (2010). A geospatial statistical analysis of the density of lottery outlets within ethnically concentrated neighborhoods. Journal of Community Psychology, 38(4), 486–496. doi:10.1002/jcop.20376

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Who knows what tomorrow brings?

Nobody does, but when we say what we think will happen in the future, it’s a type of forecasting. Though I know and have used all of the following words, they were delineated in my summer reading book: Alexander’s Policy Analysis for Educational Leaders.

Projections are based on data.
Predictions are based on theory.
Conjecture is based on intuition.

I love words!

And if this post has brought a song to mind, here is it:
https://www.youtube.com/watch?v=CFYtpTot7hQ

Two More New Categories

As I think about how this blog will be helpful for me in the future, I realize that I need two more categories: LGBT legal issues, and LGBT school issues.

As the GSA adviser, I am frequently asked by my students about the law, both regarding LGBT people in general, and regarding school laws. Much of what I know comes from my reading in the mornings, which I now do on Feedly. It will be very easy for me to “feed” that information into these categories.

I am also considering starting a separate blog for information that I will share with my GSA students at work. Keeping my personal things and my work things separate might be smart.

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PKM System Evaluation

When I began my PKM system, seven weeks ago, I said that whether it was a success would have to do with the answers to the following six questions:

1) Do I have enough information to keep me interested when I have a free hour?

2) Conversely, am I overwhelmed with too much information?

3) Are my multiple interests represented in a ratio that works for me (that is, do I get too much LGBT news and not enough world news, or vice versa)?

4) Do I feel appropriately informed in conversations in a variety of contexts?

5) Am I able to access my information when/where I need it? This refers both to new information and to information I filed days, weeks, and years ago.

6) Does my access to this information create and sustain connections to others in a meaningful way?

First of all, I probably could have been more concise, and instead of questions 1 and 2 just said “do I have an appropriate amount of information?” Regardless of my concision issue, I have been happy with the amount of information available to me, both via Feedly (my news sources and my cohort members’ blogs) and particularly via my podcasting in the car.

I think the biggest success of the system so far has to do with question 5. I am no longer sending myself e-mails to remember websites: I just save important things to Pocket, and deal with them from there when I have time. This frees up my e-mail accounts for what they are really for: communicating with other people. I am also finding that reading, blogging, and filing completely on the i-pad is working wonderfully. It was a struggle to get set up, but once I learned how to make the Apps work together (Feedly with Pocket with WordPress), it was seamless. It is so easy to take my i-Pad just about anywhere, and the battery life is amazing: I hardly use my laptop any more.

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Memory Overload

I noticed recently that my iPhone is very close to full: I only have about one gigabyte of space available. Wondering how I could have filled up all the memory, I rummaged around and noticed that a great deal is take it up with photos.

I am also noticing that I can put photos on my blog. This is something I need to look into: can I just store photos “in the cloud” and not worry about them taking space on my phone? I know some blog spaces are free and others are free up to a certain amount of memory. It is definitely an idea worth pursuing, though.

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Plans Change

I was at lunch yesterday with a friend, and she asked me how working as an administrator is different from working as a teacher. I said that, when I am a teacher, I spend my morning at home (while I shower and eat breakfast) and on the way to school thinking about my day. I go over the lesson I am going to teach, and the activities I will lead the students through.

As an administrator, I don’t always know what the day holds until I get to work. It is an interesting change, showing up for work without a detailed, hour by hour plan.

Today was one of those days. If you had asked me what I was going to accomplish today, at 6:30 this morning I could have made a list of 10 things I would have liked to have gotten done. Now it is 2:30, and though I have accomplished many things, zero of those 10 things have been attended to.

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