Education
Finance
and Accountability
Program
(EFAP)
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John Yinger Director |
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William Duncombe Associate Director |
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Jerry Miner Senior Associate |
Ross Rubenstein Senior Associate |
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Robert Bifulco Senior Associate |
Jeffrey Weinstein Senior Associate |
Kalena Cortes Senior Associate |
The Equivalence of State Education Aid and Property Tax Relief
William Duncombe
John Yinger
Over the last two decades, many states have implemented new forms of state aid to education, major property-tax-relief programs, or both. On the surface, these two types of policy appear to be quite different. They usually have different sources, namely, state court decisions concerning education finance equity in the case of aid programs and local taxpayers revolts in the case of property tax relief. Moreover, they are implemented through different institutions; aid flows from the state to school districts and property tax relief appears in property owners’ tax bills. As a result of these differences, these two types of policy are typically viewed as having nothing to do with each other. In fact, however, state aid and local property taxes are both fundamental components of the education finance system. The equity of educational outcomes depends on the form of property tax relief, the distribution of local property taxes depends on the form of state aid, and states that fail to recognize these connections may implement aid and property tax changes that work at cross purposes.We have two projects on this equivalence idea. The first focuses on the issue of property tax relief and is presented in a forthcoming publication. This publication describes existing property tax relief programs, including state aid to local governments; discusses recent trends in the use of these programs; explains why property tax relief programs typically provide considerably less tax relief than advertised; and shows that alternative tax relief programs that appear quite different on the surface can have equivalent impacts on property tax burdens. This work is presented in “Alternative Paths to Property Tax Relief,” in Property Taxation and Local Government Finance (Cambridge, MA: Lincoln Institute of Land Policy, Forthcoming).
The second project focuses on state aid to education. This project formally proves the equivalence between various state education aid and property-tax reform programs, determines the extent to which various property-tax reform programs promote or undermine widely used equity goals for state education aid programs, and determines the extent to which various education aid formulas promote or undermine widely used standards for property-tax relief. The equivalence results in this project extend the well-known equivalence theorems of Bradford and Oates to consider the flypaper effect and governmental efficiency. The results in the paper are illustrated with data from New York State.
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