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Chapter 5 Sources of Revenue

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1 Chapter 5 Sources of Revenue
This multimedia product and its contents are protected under copyright law. The following are prohibited by law: any public performance or display, including transmission of any image over a network; preparation of any derivative work, including the extraction, in whole or in part, of any images; any rental, lease, or lending of the program. Copyright © Allyn & Bacon 2008

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 Copyright © Allyn & Bacon 2008

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 Copyright © Allyn & Bacon 2008

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 Copyright © Allyn & Bacon 2008

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 Copyright © Allyn & Bacon 2008

6 Copyright © Allyn & Bacon 2008

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 Copyright © Allyn & Bacon 2008

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 Copyright © Allyn & Bacon 2008

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 Copyright © Allyn & Bacon 2008

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 Copyright © Allyn & Bacon 2008

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 Copyright © Allyn & Bacon 2008

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 Copyright © Allyn & Bacon 2008

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 Copyright © Allyn & Bacon 2008

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 Copyright © Allyn & Bacon 2008

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) Copyright © Allyn & Bacon 2008

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% Copyright © Allyn & Bacon 2008

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 Copyright © Allyn & Bacon 2008

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 Copyright © Allyn & Bacon 2008

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