Tax Swap Not Needed to Fund Illinois Schools

Tax Swap Not Needed to Fund Illinois Schools
December 19, 1996

Joseph Bast

Joseph L. Bast c.v. Joseph Bast is president and CEO of The Heartland Institute, a 29-year-old... (read full bio)

I doubt that I am the only taxpayer who trembles whenever Democrat Mike Madigan, the new Speaker of the Illinois House, and Republican Governor Jim Edgar say they'll work together on school finance reform. It looks like a "bipartisan" plan to raise taxes will be at the top of the legislative agenda in 1997.


The problem with school finance in Illinois is not that we spend too little on our schools. Our per-pupil spending and teacher salaries rank very well against other states, and spending has doubled (in real, inflation-adjusted dollars) since 1970. In fact, many communities around the state are spending too much for what they get in return: Repeated studies show no relationship between high spending and student achievement.


Isn't it time we started talking about affordable education and getting value for the dollars we spend on education? Why do we congratulate ourselves (and our schools) when education spending outpaces inflation year after year? We criticized such out-of-control spending when it occurred in health care and other equally important fields.


Yes, Illinois relies more on local property taxes to fund its schools than does the average state. But maybe this makes us better than most other states. Giving up this arrangement by "swapping" a higher state income tax for property tax relief would have many disadvantages. For example:


  • A tax swap would undermine local control and accountability. Studies conducted in other states show that when local control is weakened, student achievement suffers. This is only common sense: Citizens have less reason to closely monitor local school spending if the school is spending "someone else's money."


  • Reducing reliance on local taxes penalizes those communities that agreed to tolerate economic development or "nuisances" (such as nuclear power plants) that no one else wanted. It rewards "NIMBY" (not in my back yard) attitudes that can cripple economic growth and job creation.


  • And what about the windfall that businesses get when property taxes are cut and income taxes are raised? Businesses in Illinois pay 42 percent of total property tax collections; they pay just 14 percent of total income tax collections. Shifting school funding off the property tax and onto the income tax would give businesses a nearly $1 billion annual tax break, at the expense of homeowners. This is a shell game that actually hurts homeowners.

Suburban homeowners also know that increasing reliance on state taxes makes the system less fair to them, because the suburbs get back only pennies out of every dollar they send to Springfield. Most of the tax dollars collected in the suburbs are redistributed to people living downstate or in Chicago, where property taxes are lower than in the suburbs. How can that be fair?


Finally, it is simply not true that the income tax is the fairest source of revenue for the state. Income taxes place a heavy burden on young people with few assets or savings. Isn't it bad enough that we have threatened the future of "Generation Xers" by loading them with our debts? Must we also confiscate a growing portion of their earnings?


There is an alternative to the "tax swap" advocated by Mike Madigan and Governor Edgar. It is to make public schools spend tax dollars more wisely: by allowing parents to choose the schools, public or private, that their children attend, and by requiring that public funds "follow the student" to the schools their parents choose. Milwaukee, Cleveland, and Vermont already have such programs in place. Pennsylvania is likely to adopt a statewide school choice program in 1997.


If competition accomplished nothing more than keeping school cost increases within the rate of inflation, Illinois taxpayers would save hundreds of millions of dollars each year.


Would Mr. Madigan and the Governor consider supporting a statewide school choice program instead of higher income taxes?



Joseph L. Bast is president of The Heartland Institute, a 12-year-old nonprofit and nonpartisan research center located in Palatine, Illinois. In May 1996 he coauthored with Dr. Herbert Walberg and Dr. Robert Genetski a 185-page report on Illinois school finance reform.

Joseph Bast

Joseph L. Bast c.v. Joseph Bast is president and CEO of The Heartland Institute, a 29-year-old... (read full bio)