1. Chapter 5 Sources of Revenue
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2. The Taxation System
Taxation - most successful for diverting funds to public institution
attitude of citizens determines financial well-being of public institutions
Taxation - function of three variables
tax base
assessment practices followed
tax levy
education-financed by government
problem-equitable school programs and equitable tax burdens using property tax system
rate bills are obsolete
taxes often unpopular
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3. Characteristics of a Good Tax System
tax systems should be coordinated and balanced (local, state, federal)
all citizens who receive benefits or stand to receive them should owe taxes
tax burden distributed among all citizens equitably
progressive income tax most equitable
single tax cannot be fair to all
taxation theory requires diversification with broad tax base
maintenance of economic neutrality must not be disturbed
adequacy of yield-taxes applied to productive sources
progressive versus regressive taxes—at best progressive
tax erosion should be minimized or eliminated
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4. taxpayer convenience important direct
fairness and courtesy demonstrated
low collection and administrative costs
visible taxes and services
tax shifting minimized
minimal earmarking of taxes
tax structure should avoid restrictions
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5. Criteria for Evaluating Tax Structure
McCann and Delon emphasized evaluation criteria
efficiency in fiscal administration
equity in treatment of citizens
adequacy in providing funds
adaptability related to economic conditions, social demands and significant changes in education
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7. Property Tax levied against owner of real or personal property
real property not readily movable (lands, buildings, and improvements)
personal property movable (tangibles or intangibles)
first kinds of school taxes
constitute almost all local tax revenue for schools
usually expressed in mills per dollar of assessed valuation or dollars per hundred dollars of assessed valuation
some states use a tax rate on market value
historically used for local school revenue
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8. regulated and controlled by local boards of education within state law
desirable traits
direct tax
easily collected
regulated and controlled by local boards of education within state law
impossible to avoid paying
highly productive
highly visible
assessment practices
unequal assessment practices exist
foundation program created underassessment
assessment practices vary widely
problems due to political system
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9. unfairness of property tax
somewhat regressive when surplus earnings invested in personal property
urban centers-eroded tax base
urban centers-high cost students to education
municipal overburden
partial property ownership, but payment of full taxes on property
other criticisms of property tax
state-imposed tax rate restrictions
court decisions resulting in adverse opinions of tax
failed referenda
state legislative actions
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10. protects certain classes of individuals from excessive property tax
circuit breakers
protects certain classes of individuals from excessive property tax
plans vary by state
personal property taxes
remains backbone of school finance
problem with getting property assessed
measure of wealth and taxpaying ability minimized as source of revenue
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11. Income Tax progressive tax levied on yearly income
used to lesser degree by nearly all states
should include taxes on personal and corporation incomes
personal income tax erases regressive effects of property and sales taxes
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12. Sales Tax levy imposed on sale value of certain goods and services
no tax exclusion on necessities overburdens low income families
growth of e-commerce-cause for sales tax changes
e-commerce-currently taxed by federal, state and local government
e-commerce results in revenue loss for state budgets/local education agencies
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13. Sumptuary Tax
imposed by government to regulate or control a certain activity or practice not deemed in the public interest
example—federal taxes on tobacco products
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14. Severance Tax
taxes imposed on removal of natural products from land or water
measured by value or quantity of projects removed or sold
examples—oil, gas, timber, fish, etc.
tax imposed at time of extraction of product
levies for privilege of removing product from ground or water
levies-production, conservation or mining taxes
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15. Potential New Taxes
site-value taxes-land tax on actual value of the land, whether improved or not
value-added tax (VAT)-tax on value of goods at each transaction from productive to consumption (multiple sales tax)
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16. Lotteries lays taxes on the willing
regressive-greater share comes from poor players’ income
generated revue for schools varies by state from 2%-5%
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17. Private Foundations reaches out to the private sector issues raised
role of school officials in foundation and determining how money should be spent
successful foundations will result in reduced state aid
gap will widen in the quality of education in rich and poor communities
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18. School-Business Partnerships
closely related to foundation movement
types of partnerships
special services
classroom
professional development
management
systematic educational improvement
policy
partnership concept-all striving for same goal—produce students prepared for the future
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