The importance of elementary and secondary education to human flourishing, economic opportunity, and effective participation in democratic life has been acknowledged at the highest levels of American government.
Nevertheless, education has traditionally been classified as a “local good.”
While select states support this local good through a heavy reliance on state revenues for which sales and income taxes are the primary sources,
most turn in sizable part to local revenues that are overwhelmingly derived from property taxes.
Political and academic discourse on the extent to which property taxes should serve in this role regularly centers on three overarching issues: the vices and virtues of local control, the availability of mechanisms to redistribute property tax revenues from more affluent school districts to less affluent ones, and the overall stability of those revenues.
This discourse is critical in helping evaluate the consequences of taxing property values to finance education vis-à-vis the consequences of the various alternative approaches to structuring taxing and spending policy in the education space. As critical as they are, though, these issues are second order in the sense that their resolution is inextricably tied to first-order choices about property law and policy that impact the property values against which property taxes are levied.
This Essay contends, therefore, that such discourse would benefit from directing greater attention to the first-order question of how land that is taxed in any property tax scheme gains its value at the outset.
Land values, this Essay asserts, are not the mere product of individual choices and initiatives; they do not simply arise via naked operation of the free market. Rather, they are influenced in important respects by myriad societal choices made by federal, state, and local governments that are reflected in the background laws of property. These laws, both past and present, include structural choices (such as building highways, zoning land, and drawing district boundaries), financial choices (such as allowing mortgage-interest deductions, offering homestead exemptions, and subsidizing flood insurance), and protective choices (such as shielding nonconforming uses, constructing erosion-control devices, and providing disaster relief). Such choices set the terms on which private parties can develop social and economic relationships. Making these choices unavoidably requires normative assertions about the types of relationships to allow and the types of relationships to curtail. In endorsing certain relationships, the government is conferring its power on certain persons at the expense of others; in turn, these persons’ exercise of such power in the marketplace dictates property values. It follows that evaluating the justness of the government’s taxing property values to fund public education in a given jurisdiction must be informed by evaluating the justness of that jurisdiction’s background property laws.
Proposing such an evaluative exercise is not to suggest that undertaking it will produce a universalizable decree as to how education should be financed across the country.
It is true that if the property laws applicable in a given jurisdiction operate in concert with one another to create an unjust property system, any model for financing education (or, for that matter, any other public service) that is based on that system will lead to unjust outcomes. But this revelation alone is not reason enough to determine that public schools should be financed via an alternative revenue source, such as income taxes, sales taxes, or so-called “sin” taxes.
Reaching that conclusion would require a critical assessment of the justice of the laws that influence the values of the objects against which these non-property taxes are levied, as well as an evaluation of the second-order consequences of taxing those values. Those comparative assessments are well beyond the scope of this Essay. The goal here is a much narrower one: to deepen the discourse on the property tax option by encouraging analysts to direct more attention than they have to date on the influences that property laws have on the values against which property taxes are levied.
To advance the thesis that evaluating the justness of the government’s reliance on property taxes to fund public education in a given jurisdiction must be informed by evaluating the justness of the background property laws in that jurisdiction, the Essay proceeds in three Parts. Part I suggests that a discourse that concentrates exclusively on the consequences of the government’s choice to tax property values for the purpose of financing education runs the risk of underappreciating the extent to which government choices impact how those values came to be in the first place. Such a course, in turn, leaves space for proliferation of the view that land values are simply the product of individual exchange in a self-regulating market when, in actuality, property also serves a communal function: The rules and standards reflected in property laws set the terms by which individuals can engage in market exchanges by predetermining which social and economic relationships are and are not legitimate in a modern democracy that respects freedom, equality, and human dignity. In fulfilling this term-setting function, the government influences property values quite extensively.
Part II depicts how government choices that determine the contours of property rights come in a variety of forms—some structural, others financial, and still others protective—and influence property values in different ways. This depiction is not meant to be all-inclusive, but rather to illustrate via a range of examples just how sizable the government’s footprint is in determining the property values at which property taxes take aim.
Part III sets out a series of norms to help guide the evaluation of these various value-influencing property laws, on the view that reforms consistent with these norms will, given these laws’ inevitable connection to property taxes, have derivative effects on educational opportunity and delivery. These norms—the first of which is process-oriented, the second of which is substantive, and the third of which offers a conceptual bridge between the first two—include a sensitivity to the circumstances of how property law operates in a given community rather than leaning on assumptions about “typical” communities; acknowledgment of the current effects of both prior and present-day discriminatory practices surrounding property; and attention to the ways that property laws do not exist in isolation but are instead intricately integrated with each other.