School Financing in the Public Finance Context

Finally, at some point school funding needs to be placed in the overall context of local, sate and federal public finance. Property taxes historically have been the major tax supporting local services, and sales and income taxes are used to varying degrees by states, and the federal government relies most heavily on the income tax.

Issues that emerge are:

  • The degree to which each tax supports economic growth
  • Whether or not that tax is efficiently administered
  • And does it produce at worst a proportional burden on households in terms of their incomes.

A major issue for the sales tax is that historically it has been a tax on goods and items bought by individuals, but in the knowledge based economy such items comprise less than 25 percent of what households purchase; thus, states are debating the degree to which they can expand the base of sales taxes to include services (hair cuts, doctor and dentist visits, accounting help, etc.) in addition to goods.

Chapter 11 of our popular school finance text addresses these and other public finance issues, including the degree to which lotteries are a good source of school funding (finding that they produce small amounts of revenue and are regressive in their incidence).

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