Sunday, September 24, 2006

Public school financing

I went to school and graduated from Mormon Trail Community School District (no I'm not Mormon, by the way). It is the same school district in which we currently reside. Like all other public school districts in Iowa, a fair amount of its operating funds come from a portion of property taxes. Here, about 45% of property taxes go to the school district.

While we only own the acreage we live on, we rent nearly 1000 acres, and that rent contributes to the payment of taxes on probably 1600 acres (non-tillable acres, etc). Using figures from here, I found that my landlords and myself pay $23,476/year in property taxes. 45% of this is $10,564.

Our two children, before they are even in school, are essentially paying a tuition of $5282 each, spread between the two school districts we farm in. Now, someone who resides in town in an older house probably pays around $500/year in taxes, or $225 going to the school. Their two kids essentially pay $112.50 for tuition, or about 47 times less than my kids.

Now, in any other industry, if a person was charged 47 times more for a service than another, but received the exact service, there would be complaints of price gouging. I bet Barbara Streisand would sing about the injustice. But when it comes to using property taxes to educate children, its more likely she'd be singing "Stick It To The Man!"

I suppose if we lived in a city, and everyone paid more or less similar property taxes for their houses, it might be more equitable. But we who make a living off the usage of real estate are severely burdened to educate other people's children, and yet have little to no recourse.

Of course, it makes sense for me to pay taxes for roads, fire protection, and law enforcement, because I (or my landlords) have more real estate to be protected and traveled to than, say, a house in town. But it makes no sense whatsoever to tax property to pay for education. Because someone owns 160 acres and needs a good road to it, he/she contributes taxes to build and maintain a road. However, because they own that 160, there is no direct linkage to a burden to pay for public education.

The system of taxing real estate to generate revenue for public schools is unfair and antiquated. We need a system that does not heap the burden of revenue creation on property owners, but on the users of the public system itself, the students and their parents. This will create a more equitable system to finance public schools.

13 Comments:

Blogger Jordan said...

Preach brother, I could cry you a river over the business property tax I pay, but I will spare you the waterworks.

Lets just say I pay $500 a month for a 1,200 SQ FT store. Yeah, real fair...

8:03 PM, September 25, 2006  
Anonymous Anonymous said...

In Warren Co. for this person with no children....
62% of my annual tax bill of +$4700 per year goes to the school system.
And this is not a mansion by any means. It is just a manufactured home on less than 10 acres.
So; how best to address this issue of disproportionate taxation?

Vouchers?
Consumption tax (google fair tax)?
Granted that a well educated population benefits all....but damn! $3000 per year I have confiscated from my checking account for what????

Bart

10:09 PM, September 25, 2006  
Blogger noneed4thneed said...

Interesting article. I know that other states fund education differently than property taxes. I never really thought about the rural issues you brought up. Thanks for posting this.

7:29 AM, September 26, 2006  
Anonymous Overtaxed in Linn County said...

Amen!
An ideal solution would be to dismantle and privatize the public skool system, which has been corrupted by the Teachers Unions. The taxpayers keep paying more and more, and getting less and less in return. If you choose to have children, you should have the responsibility of educating them. Choice => consequence. Just be thankful that you do not own/farm land here in the Peoples Republic of Linn County, where they really stick it to the folks who own property.

7:29 AM, September 26, 2006  
Anonymous John Neff said...

I agree that it is an unfair tax distribution but your argument appears to be a bit self-serving. Evidently you and your wife did not attend school and neither did your landlords who do not appear to have children.

7:42 AM, September 26, 2006  
Blogger Jordan said...

John, isn't not about being "self serving" but rather being fair...

8:50 AM, September 26, 2006  
Anonymous John said...

Bob,

You're not paying those taxes, your customers are. They're included in the cost of your goods just like fertilizer and diesel and whatnot.

The money just passes through your hands like sales tax through the hands of the implement dealer or whoever.

Imagine if this cost disappeared for all farmers -- do you think you'd suddenly have a $10,000 profit windfall? Nope, the market would correct and your income would drop a commensurate amount.

This process could continue all the way down to the consumer. The consumer might then find their pork chops a nickel cheaper. Hopefully they save all these nickels for many years before having kids because they're going to really need them to pay their kindergarten tuition.

While this might seem at first blush like a libertarian utopia, I would argue that you don't have to stare too hard at some of our inner cities and extrapolate too far to see what having a giant nationwide uneducated and unemployable underclass might look like.

I'd rather spend the money on the school system than the justice system. YMMV.

2:22 PM, September 26, 2006  
Blogger bgunzy said...

John, I cannot necessarily pass on the costs of production to my "customers". As a farmer, I am at the whims of the marketplace. Of course, I do sell only when I find a profit, but I don't have a typical set profit margin as found in other industries.

Of course we attended public schools, but my parents and grandparents did not have to shoulder such a great burden through taxes as I do today. There were more farmers then (with children going to school, I may add), and less taxes per acre, so the costs were considerably less per household.

Today, as the number of farmers getter fewer, yet more real estate is needed to make a decent living, the burden of taxes, and therefore school funding, falls on increasingly on them.

6:43 PM, September 26, 2006  
Anonymous John said...

Bob,
Every business is at the whims of the marketplace. And no industry I know of has a set profit margin -- the price is what the market will bear, and if your costs exceed that, you lose. In the absence of government interference, (like subsidies or price supports), of course.

PS, if you think your property tax bill is high, 801 Grand in Des Moines pays about the same as 350 square miles of farm land.

10:14 PM, September 26, 2006  
Blogger bgunzy said...

Are pizzas, Ford pickup trucks, and Sony DVD players priced by a group of people somewhere in the bowels of Chicago? No, of course not. Pizzas, Ford pickups, and Sony DVD players are priced by the manufacturer. Sometimes they are discounted, but the manufacturer always starts at a set price.

Farmers, on the other hand, have their prices determined by the CBOT, CME, and other commodity exchanges. We cannot necessarily pass the cost of production on to our buyers, because the buyers are sometimes buying at below cost of production.

Nonetheless, the issue I bring up is that in a rural community, land owners and their tennants bear the brunt of the majority of property taxes. Since education revenue is obtained from property taxes, individual farmers, being the largest users of real estate in a rural area, pay more for education than town dwellers.

When there were more farmers on the land, and these farmers had many children, then one could argue that the system was equitable; an 80 acre farm's property tax might be similar to a 3 bedroom house's tax in town.

However, times have changed, and today individual farmers, owning and renting more land than the simply 80 acres in the past, are paying a greater share of the property taxes, and therefore education fees, than before. Maintaining this antiquated system is not equitable.

I'm not sure what a viable solution is at this time, however. I'm just calling attention to this injustice.

801 Grand's tax bill should be high; think about the fire equipment needed to put out a fire on the 25th floor. More than what would be needed to put out a grass fire here. Same with police protection, sewer, streets, etc.

7:28 AM, September 27, 2006  
Anonymous John said...

CBOT and CMEX are not some evil entity with majic powers to set prices and more than Ford can. Prices are set by a willing seller meeting a willing buyer. You may not like today's corn price, but *somebody* was willing to sell and buy at that price.

How much schooling does 801 Grand use?

6:26 PM, September 27, 2006  
Blogger Jordan said...

Does Ford have price ceilings and floors?

And doesn't arguing 801 Grand support Bgunzy's statements? 801 Grand is a business and so is farming. I thought the post was saying farmers [business owners] take too much of the tax burden for education.

6:54 PM, September 27, 2006  
Blogger bgunzy said...

Regardless of our perceptions of the CBOT and CME, the point remains that in paying for public educational services, those who own or rent sizable real estate quantities are shouldered with the greater burden. Would you not agree?

Is it fair for a business or individual to pay for a service it does not directly benefit from? As mentioned before, one should pay more for fire protection, police protection, road upkeep, etc if they have larger real estate holdings, but why should they pay more for education services?

8:18 PM, September 27, 2006  

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