The Future Role of the Property Tax in the Funding of K12 Education in the United States

This paper reviews the role of the property tax in funding K–12 education. At present, local and state governments each contribute a national average of 44 percent of the funds spent on public education, with the federal government contributing 13 percent. The bulk of the funding raised by local governments is derived from the property tax. Currently, about 35 percent of total public school funding is derived from property taxes, and this percentage has been remarkably stable since 1977. But as Fischel notes, the degree of property tax reliance varies considerably among states, with several, such as Connecticut, deriving more than 50 percent of total public school funding from the property tax, and a few, such as Alabama, deriving less than 15 percent from this tax.

Reschovsky is pessimistic about the prospects for future federal and state funding of K–12 education. He points out that the federal government has a high debt burden, faces rising costs of entitlement programs, and has an aversion to raising taxes. State governments face the same anti-tax environment, while their ability to fund education aid is limited by revenue sources that fail to keep up with economic growth. Additionally they face pressures to increase spending on health care and pensions. Reschovsky concludes that funding public education at an adequate level will likely require a continued and possibly enhanced role for the property tax, a substantial challenge given demographic changes such as the rising proportion of the population that is elderly and pervasive antipathy toward the property tax.

This paper was presented at the Lincoln Institute’s annual Land Policy Conference in 2013 and is Chapter 6 of the book Education, Land, and Location.