Public Education, Medicaid, CHIP, Food Stamps—A Bake Sale Is Not Enough

Three decades ago, I was sucked into public education advocacy as a mom with children in a school district whose local school tax was in danger of failure at the polls. School levy elections are gut-wrenching experiences for parents in my state, where we have scanty and unequal state investment in our schools along with a local property tax freeze that can be overcome only when a school district’s residents vote for an increase. In the years when my children were in elementary and high school, school finance seemed at the heart of what mattered—the size of the Kindergarten class—reading enrichment specialists to help children catch up before they fell hopelessly behind—the high school orchestra—guidance counselors with small enough case loads to guide adolescents through the college application process—advanced lab science classes and the Calculus class.

At a community meeting, someone once asked me, “Can you tell me another way we can fund public schools instead of through taxes?” I still remember looking at the woman and biting my tongue to hold back my own question: “Were you thinking of a bake sale?” Did she misunderstand the scale of the endeavor of a public education system that must serve over 50 million children?  Did she think of education and other programs that serve children as a charity that can be paid for with a few dollars donated during the holiday season?

Now that the Senate—like the House last month—has passed its version of tax reform and House and Senate will reconcile their versions in the conference committee, we are familiarizing ourselves with the details of what it will mean, including some specifics affecting public schools.  Tax bills passed by the House and the Senate both adhere to the theory of supply-side, trickle-down economics; they tilt heavily toward benefits for corporations and the extremely wealthy, on the assumption that benefits will trickle down to the rest of us.

Specifics that will directly affect K-12 public education are summarized by Moriah Balingit and Nick Anderson for the Washington Post:

  • Both Senate and House bills cut what is now a federal tax deduction for taxes paid to state and local governments, although Education Week‘s Andrew Ujifusa reminds us the Senate bill does preserve a deduction for state and local property taxes up to $10,000. Advocates worry that cutting this deduction will make it harder for states and school districts to increase desperately needed taxes for education.  Today state and local taxes raise 92 percent of the cost of public schools.
  • Both Senate and House bills make it possible for parents to use 529 savings plans—that can now be used only for the payment of college tuition—for private K-12 school tuition. A 529 plan enables parents to invest after-tax dollars into savings plans for college, but when the investments in the 529 plan appreciate, the increase will not be taxed.  Clearly this provision will affect only wealthier parents who can afford to make sizeable investments.
  • The Senate plan doubles what is currently up to a $250 tax deduction for teachers spending their own money for for classroom supplies. While the Senate plan increases the amount a teacher can deduct annually up to $500, the House version eliminates it altogether.

The really serious consequences that will follow whatever tax overhaul House and Senate reconcile in upcoming weeks are more complicated, however, and until recent days little discussed. On Friday, in a column for the Washington Post, Jeff Stein reported on what he’s been hearing now that members of Congress feel more confident about the passage of their tax plan. The Center on Budget and Policy Priorities has been predicting what it has dubbed “a tax reform two-step“: cuts in taxes followed by cuts in government programs. Stein quotes members of Congress admitting they intend to cut spending once tax reform passes: “High-ranking Republicans are hinting that, after their tax overhaul, the party intends to look at cutting spending on welfare, entitlement programs such as Social Security and Medicare, and other parts of the social safety net. House Speaker Paul D. Ryan (R-Wis) said recently that he wants Republicans to focus in 2018 on reducing spending on government programs… While whipping votes for a GOP tax bill on Thursday, Senate Finance committee Chairman Orrin G. Hatch (R-Utah) attacked ‘liberal programs’ for the poor and said Congress needed to stop wasting Americans’ money. ‘We’re spending ourselves into bankruptcy,’ Hatch said. ‘Now, let’s just be honest about it: We’re in trouble. This country is in deep debt.  You don’t help the poor by not solving the problems of debt, and you don’t help the poor by continually pushing more and more liberal programs through.'”

Is there any evidence that supply-side, trickle-down economics generates needed revenue by growing the economy? Governor Sam Brownback in Kansas called his tax cuts a real life experiment in supply-side economics. Explosive economic growth, he predicted, would follow the tax cuts. Here is Michael Tomasky, writing for the NY Times about how the experiment turned out: “Kansas, under Gov. Sam Brownback, has come as close as we’ve ever gotten in the United States to conducting a perfect experiment in supply-side economics. The conservative governor, working with a conservative State Legislature, in the home state of the conservative Koch brothers, took office in 2011 vowing sharp cuts in taxes and state spending…. The taxes were cut, and by a lot. The cumulative cut was forecast to be $3.9 billion by 2019… The cuts came. But the growth never did… The experiment has been a disaster… Finally, even the Republican Kansas Legislature faced reality.”  Last June, after the state’s supreme court had presented an ultimatum to the legislature to improve school funding by June 30, or school could not open in September, both houses of the Kansas legislature  voted to overturn several years of Governor Sam Brownback’s tax cutting and at the same time to eliminate a special taxing innovation that reduced business taxes on pass-through income. The tax increases in Kansas last June have begun to restore solvency to the state.  The AP‘s John Hanna reports: “Kansas is reporting that it collected $8.5 million more in taxes than anticipated in November…. Tax collections this year are 11.7 percent ahead of last year’s collections. Lawmakers increased income taxes earlier this year to help balance the budget.”

Then there is Ohio, where Nick Pittner, the litigator of Ohio’s long-running but ultimately disappointing DeRolph school funding case recently concluded: “Ohio still lacks a school funding formula that meets the requirements set forth in the DeRolph decisions.”  One reason “is the ‘T’ word. School funding reform in the traditional sense cannot be done within the confines of existing revenue…. The prevailing political agenda in Ohio, as in many other states, has been to do everything possible to cut taxes….”

This past Sunday, Brent Larkin, former director of the Plain Dealer‘s editorial page, applied the lesson from Ohio to his analysis of Congress’s current tax overhaul based on trickle-down: “Then there’s the preposterous notion the tax cuts will generate so much economic growth they’ll pay for themselves.  It’s the same specious argument Ohio Gov. John Kasich and the legislature used to sell the huge cuts in Ohio’s income tax—cuts that spurred little growth but left the state with a budget crisis that required it to curtail worthwhile investments in the state’s future and essential funding for children.”

Nobel Prize winning economist, Joseph Stiglitz confirms Larkin’s skepticism: “The sordidness of all this will be sugarcoated with the hoary claim that lower tax rates will spur growth. There is simply no theoretical or empirical basis for this…. ”

Finally, another Nobel laureate, Paul Krugman describes his concerns about the tax reform plans Congress will be reconciling: “This time around, much more clearly than before, the goal seems to be to favor wealth, especially inherited wealth, over work. And buried in the legislation are multiple measures that would make it much harder for the children of the middle and working classes to work their way up… Suppose that a child from a working-class family decides, despite limited financial resources, to attend college, probably taking out a loan…. Under the House bill, that interest would no longer be deductible… What if you’re working your way through school and your employer contributes toward your education expenses?  The House bill would make that contribution taxable income. What if your parent is a university employee, and you get reduced tuition as a result? That tuition break becomes taxable income. So would tuition breaks for graduate students who work as teaching or research assistants. So what we’re looking at here are a variety of measures that will close off opportunities for children who weren’t clever enough to choose wealthy parents.  Meanwhile, funding for the Children’s Health Insurance Program, which covers more than eight million children, expired a month and a half ago—and so far, Republicans have made no serious effort to restore it. That is surely the shape of things to come…. So this isn’t just ordinary class warfare; it’s class warfare aimed at perpetuating inequality into the next generation. Taken together, the elements of both the House and the Senate bills amount to a more or less systematic attempt to lavish benefits on the children of the ultra-wealthy while making it harder for less fortunate young people to achieve upward social mobility.”

This blog has covered the 2017 tax overhaul here and here.