Friday, November 8, 2013

Eduardo Porter: The Feds Abet The Cause of Greater Inequality

A Tax Subsidy for Richer Schools

My Economic Scene column on Wednesday about the inequity of school funding pointed out that the main reason schools in poor neighborhoods have less money than schools in rich neighborhoods is that they are mostly funded by local property taxes.
The federal government, I argued, partly redresses the lopsided local funding. But it provides too little money to move the dial very much. The annual appropriation for the Department of Education has in recent years included only $24 billion or so for K-12 education.
That’s just a smidgen of the $600 billion spent, roughly, in public schools across the country.
But a reader pointed out something I failed to consider: the loophole that allows homeowners to deduct their local property taxes from their federal taxes. This amounts to a big federal subsidy that benefits schools in affluent neighborhoods way more than it helps poor schools.
This year, the federal deduction of property taxes will be worth $27 billion, according to the Joint Committee on Taxation – more than the federal government’s entire K-12 budget.
So perhaps the story isn’t simply that the federal government’s effort is too puny to counteract the high concentration of property taxes in rich neighborhoods. The federal government is actually abetting the cause of greater inequality.

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