Wednesday, April 21, 2021

Entrenched Discouragement: Property Tax

Entrenched Discouragement: 

Critical Policy Analysis of 

Property Taxes 

in Funding Formulas

H. L. Schmidt

Department of Educational Leadership

EDL 704-201: Politics of Educational Leadership

Dr. Amanda Potterton

April 2021


This is the third in a series of papers analyzing three elements that have a significant, and possibly outsized, impact on educational budget formulas. The first paper looked at the use of enrollment and attendance--and the varying ways in which it was measured-- through a critical policy analysis lens to determine the context of attendance as a factor and then understand how that context affects the “development, implementation, and outcome” (Sampson, 2019) of the resulting budget policies. This paper continues the analysis by investigating the context of property tax in budgeting formulas, especially at the local level, and the gap revealed between the policy intent and its practical outcome. Policy analysis shows “social stratification and the broader effect a given policy has on relationships of inequality and privilege” (Diem, Young, Welton, Mansfield, & Lee, 2014 as cited by Sampson, 2019). In the case of local budgets, this gap is stark and widening.

Property tax as a revenue stream for education is often heralded as a measure that ensures citizens aren’t paying for something they don’t use, a neo-liberal cafeteria-style allocation of municipal revenue, not from research in best practices for education. Such a framework devalues educational spending and looks at students as customers, positioning the school as a business and not as an essential institution for thriving. Seen in this way, the process of funding schools becomes adversarial, focused on outputs as opposed to outcomes. 

In times of economic recession and during a period of public outcry against taxation, this market-based rhetoric gains traction in public opinion, resulting in elected officials who reflect contemporary sentiment. Yet qualitative research found that “permanent additional money improved student achievement and high school graduation rates and decreased poverty rates, while sharp spending cuts had the opposite effect.” (Lafortune, Rothstein, Schatzenbach, 2016).

Nearly half (45.6%) of school budgets come from local revenue (, largely from property taxation. This paper examines the role of property tax as a significant revenue stream for educational funding, contextualizing it for modern urban home ownership and rental patterns, while also analyzing the ways in which property tax perpetuates existing systems of disparity, entrenching diminished opportunities for marginalized communities.

Property Tax

Budgets are responsible for providing “equity for students;” “adequate resources to local school districts;” “predictability and stability of education resources over time;” and a finance system that “supports student learning” (NCSL, 2021). “Local governments depend almost exclusively on property taxes.” Funding formulas that rely heavily on property tax create actively adverse conditions to all these aims: while the taxation rate is uniform, the variability of the tax base results in dramatic disparities in local budgets, even within a district. Such variance perpetuates systemic inequity by allocating greater resources for schools in wealthy neighborhoods while diminishing resources for schools in poor neighborhoods, materially affecting the outcome for students and perpetuating an imbalance of educational opportunity based on economic status. 

Economically disadvantaged neighborhoods have lower home values, leading to lower property tax revenue. At equal rates of taxation, the revenue generated by a home valued at $100,000 is only ten percent of that of a home valued at one million. Progressive taxation -- formulas that seek to lighten the tax burden of poorer neighborhoods -- often provide a lower limit beyond which property tax is not assessed. The language often reads that taxes are assessed on property valued above a certain amount, resulting in poorer neighborhoods generating even less for the public coffers. While there is no doubt that these progressive policies reduce the tax burden to disadvantaged individuals, use of property tax as a factor in budget allocation lessens the available revenue in the neighborhoods that need it most. This is especially evident in the budgets of the schools of impoverished neighborhoods. Where property values are low, educational budgets are dramatically lower than for schools in wealthier neighborhoods, a disparity that manifests within districts.

Property tax adjustments remain a key point for local officials and are affected by economic cycles of boom and bust. In times of plenty, budgets swell and it often seems that no tax increases are necessary. In times of scarcity, though, local governments are disinclined to raise taxes, an unpopular move at any time, but especially during a downturn. In the wake of the 2008 economic crisis, for example, local governments saw budgets shrink to record lows. The 2008 crisis was largely driven through the housing market and had a significant impact on local budgets. “To offset revenues lost during the recession, most states cut education and other spending rather than raise taxes. At the same time, municipal property tax revenues fell due to the housing crisis.” This reduction, in turn, affected school budgets and teacher pay, and many states still have not recovered.  In 2018, 24 states had school funding below 2008 levels.

Further exacerbating the problematic reliance on property tax for local revenue is the shift in residential patterns in the last twenty-five years. Americans are more mobile than ever, moving house and changing jobs at unprecedented rates. They move to find better jobs, but increasingly they are also moving to find better cities. And “more U.S. households are renting than at any point in 50 years,” with “8 million householders between the age of 35 to 44 years old made up the largest population of renters in the U.S. in 2019, followed by 7.3 million householders aged 45 to 54 years old.” Even though college-educated residents are the least likely to be renters, they reflect the trend of increasing rental residence, 29% in 2016 up from 22% in 2006.

Increasing rental rates in cities has a ripple effect on property tax revenue: renters don’t pay property tax, and often the buildings in which they reside are afforded tax incentives for development that include a period of diminished taxation or outright tax amnesty. The downstream effect is that property tax revenue no longer reflects the residential makeup of the city, long held as the foundational rationale for using property tax as a metric for providing services in proportion to residency. Residential patterns of the twenty-first century make clear that attracting high-skilled workers doesn’t necessarily translate to increased property tax revenue: a brain surgeon who rents a luxury loft apartment doesn’t pay property tax, while a working-class warehouse homeowner does. The effect on school budgets is devastating.

At its core, property tax reflects better revenue for wealthy neighborhoods and diminished funding for schools in poor sections of a city. When placed in context of modern residential patterns, the revenue stream is choked by increasing rental rates by age groups most likely to be parents of school-aged children. Reliance on property rates for local schools diminishes educational opportunities across the board, an impact that has a thunderclap impact on poor neighborhoods.


Examining the ways in which local school budgets are impacted by property value and property ownership reveals a reliance on commercialized, commodified, market-driven concepts, most notably from the neoliberal tradition that prefers quantitative data over qualitative research. The outsized valuation of quantitative data reveals prioritization by policy makers of market-based assumptions about the purpose of education, much in line with what Sanchez found (2019). Changing the framework of the formula and analysis of the underlying assumptions implicit in the variables themselves can prioritize best practices and increase “policy knowledge” by being based on qualitative research rather than quantitative measurements, effectively transforming budget formulas “from the ground up.” (Dumas & Anderson, 2014). 


Cilluffo, Anthony, Geiger, A.W., and Fry, Richard. 2017. “More U.S. households are renting than at any point in 50 years.” FactTank: News in the Numbers, Pew Research Trust, July 19, 2017. 

Diem, S., Young, M. D., Welton, A. D., Mansfield, K. C., & Lee, P. (2014). The intellectual landscape of critical policy analysis. International Journal of Qualitative Studies in Education, 27 (9), 1068-1090.

Dumas, M.J., Anderson, G. Qualitative research as policy knowledge: framing policy problems and transforming education from the ground up. Education Policy Analysis Archives, 22 (11). 

Gordon, Tracy. 2012. State and Local Budgets and the Great Recession. Stanford, CA: Stanford Center on Poverty and Inequality., (2021). U.S. public education spending statistics [2021]: per pupil + total. 

Lafortune, J., Rothstein, J., Schazenbach, D. W. (2016). School Finance Reform and the Distribution of Student Achievement. Washington Center for Economic Growth.

Leachman, M., Masterson, K., and Figueroa, E. (2017) Center on Budget and Policy Priorities. 

Mantel, B. (2018, August 31). Education funding. CQ Researcher, 28, 705-728. 

National Conference of State Legislatures (2021). The state role in education finance.

Sampson, C. (2019). “The state pulled a fast one on us”: A critical policy analysis of state-level policies affecting English Learners from district-level perspectives. Educational Policy, (33)1, 158-180. 

Sanchez, J. (2019). Framing the common core; An analysis of four key policy actors. Teachers College Record, 121 (080306) 1-34.