There are different theories of how taxes should be collected. One theory is the benefit theory which suggests that the people who benefit most from government programs should pay most tax. However, it is the poor who benefit most from government services and they have the least amount of money to pay tax. Taxing people based on the benefit principal would is considered a regressive tax because the poor would have to pay a larger percentage of their earnings than the rich (Brimley, Verstegen & Garfield, 2012) and because the rich can afford private education for their children they could avoid paying tax for public education altogether. The Benefit Tax Theory would not levy enough taxes to adequately fund education and because public education benefits the whole state and the entire country, everyone should provide financial support to educate the people. The goal of education is to prepare a citizenry to be productive, community contributors who are able to take care of themselves.
Another theory of taxation is the ability to pay theory. This tax seems to be the most equitable because it taxes people based on their earned income. The more income earned the more taxes paid. This tax is considered a progressive tax. However, during economic recessions it may not be adequate. The labor force decreases during economic recessions; less money is paid in taxes and more strain is placed on government fund programs that provide unemployment and disability insurances, food stamps and aid to families with dependent children (Temporary Assistance to Needy Families). To address the issue of adequacy different forms of taxes are still needed.
As previously stated the property tax was first collected to fund public education, however, because property values differed and the local communities paid for educating the students living within their community, schools did not receive equitable funding. Schools situated in areas with high property values received more funding and schools located in communities with low property values received less funding. All students need the same educational opportunities to acquire the skills that will prepare them to successfully compete within the market place. Therefore, each school district needs to receive enough money to provide an adequate education to its students. Different court rulings (Serrano v Priest, 1971) and legislative acts (Propositions 13, 1978 and Proposition 98, 1988) addressed the issue presented concerning property taxes and equity for tax payers and school districts. The court found that because public education benefits all state residents it should be a state function rather than a district function (Brimley, Verstegen & Garfield, 2012). Presently the state funds education from the monies it collects in taxes.
Neither the income tax nor the property tax provides sufficient funds to adequately educate students in public schools. Other forms of taxes have been suggested including the personal tax, the sales tax, the lottery, sumptuary taxes and severance taxes. It’s difficult to collect the personal tax because there is no way to make sure that people are being honest about their personal holdings. But personal taxes on automobiles and yachts are collected. They are conspicuous enough to identify and regulate. The sales tax provides revenue to states as well, but it is not a fair tax unless it excludes food and medicine. When it includes food and medicine, it is regressive in nature because the poor spend more of their earned income on food and medicine than the rich and therefore the poor suffer from this tax burden. Taxes should not be a burden that stops people from purchasing specific products (Brimley, Verstegen & Garfield, 2012).
There is disagreement over whether the Lottery is really a tax. Less than 2% of the money collected from the sale of Lottery tickets goes to fund education. If it is a tax, it is regressive because most Lottery tickets are purchased by the poor, who are willing to spend a few extra dollars to win a lot of cash (Brimley, Verstegen & Garfield, 2012). Sumptuary/excise taxes are sometimes referred to as” sin” taxes (Glencoe, 2005). These taxes are imposed by the government to regulate or control cigarette smoking and ingesting intoxicating beverages. Cigarettes are the most heavily taxed product in the United States. Taxes paid to the Federal, state and local governments on each pack of cigarettes is greater than the amount of money received by retailers, producers and farmers combined (RJ Reynolds, 2014). Also taxes on intoxicating beverages are high (Tax Foundation, 2014). Taxes on cigarettes and alcohol represent a large revenue source to the government. Therefore, the government stands to lose a lot of money if it bans the sale of cigarettes or alcohol. Additionally, we witnessed the birth and expansion of crime when the buying, selling, manufacturing and transporting of intoxicating beverages were banned during prohibition 1920 – 1930 (Hansen, 2014),
Severance taxes are imposed on the natural resources removed from our earth and they do not account for large revenues to the government. Of the 35 states that imposed the tax in 2010 only 16 realized more than 1.0 percent of their total tax revenue from this source. States that are rich in the natural resources that our industries use; oil, oil shale, coal, gas, refined petroleum, liquid hydrocarbons and minerals can collect this tax, however, these resources are not native to each of the fifty states. In summary, the income tax is probably the best source of revenue to use to fund public education. Education is expensive. Some student groups require additional program funding than other student groups. English Language learners, Students with disabilities (Special Education), foster care youth and students from low income families need more than the funding required for the three R’s. Also, there is a heavier concentration of students with special needs living in urban areas than in the suburbs creating a greater need for additional funding in the urban areas.
The least adequate funding source for public education is the personal tax. The personal tax cannot be easily identified and regulated. The cost incurred with identifying and regulating taxes on personal holdings (stocks, bonds, annuities and savings) would create more of an expense than the revenue collected (Brimley, Verstegen & Garfield, 2012).
Brimley, C., Verstegen, D. & Garfield, R. (2012). Financing Education in a Climate of Change. Pearson
Education Inc. Upper Saddle River, New Jersey
Author Glencoe/McGraw Hill. (2005)Economics- Principles and Practices
Hansen, D. (1997 – 2014). Alcohol: problems and solutions. Sociology Department State University of
New York Potsdam, N Y
Legislative Analysts Office (2005). Proposition 98
RJ Reynolds (2014). Transformtobacco.com. https://www.rjrt.com/taxpays.aspx
Serrano v. Priest, 5 Cal.3d 584 (1971)
Tax Foundation (2014) http://taxfoundation.org/blog/map-spirits-excise-tax-rates-state-2014