The Pyrrhic property tax
The property tax has a strange ambivalence. On the one hand, it tethers the fate of public goods like education to the cruel vicissitudes of racial capitalist commodity markets, whether residential and commercial real estate or other kinds of property. While organizers of Minnesota's landmark fiscal disparities programs call it the "tyranny of the local property tax" and created an ingenious system to fight against it, the Lincoln Land Institute (LLI)--by no means rabid capitalists--continue to call it bulwark of public finance which must be preserved for the public good.
In a new report, the LLI recognizes this situation as the "dilemma" of the property tax. The dilemma is that linking the material conditions of public goods to the inequities of private property means giving private property a basic power over the distribution of public goods, on the one hand, but forcing private property to finance public goods on the other.
To be painfully clear here, when you rely on local property taxes solely within the boundaries of a school district, this creates fortresses where districts with high property values can tax at relatively low rates to get relatively more money for their schools (even then people in the district complain their taxes are too high, like the Wolk case I describe later); while districts with low property values have to tax at high rates to get less. What's worse, the high property value districts are actually stealing from the surrounding urban and rural districts, since their property values are high precisely because of their proximity to these places, which is what we call super-expropriation, since the low property value districts tend to be more diverse across the social categories. The low property value districts are shit out of luck, relying on state grants that tend to be inadequate and a federal government who's policy is that the word education doesn't occur in the constitution, so it has no obligation to pay for it.
Before we get into more contemporary cases, let’s look at the history. According to historians, the property tax was actually a (white) working class demand that took up and took on property owners to pony up funds for public education. It was a working class victory to get it in the first place. But was it pyrrhic?
Billy D. Walker tells the story of the property tax in a 1984 essay in the Journal of Education Finance. Going back into the distant past he notes early land taxes in Athens from 596 BCE, taxes on property to fund the Crusades in medieval England, and then the first property taxes to pay for education during the Reformation in Germany, in Magdeburg in 1524 when Phillip Melanchthon made good on Luther's proposal to fund schools to teach the budding nation-state's kids.
Fast forward to the Reformist Puritans, extremist Protestants following Luther, who left their home in England after losses in the wake of the Reformation and colonized what would become the United States. Walker says they couldn't really tax property to fund their schools, even though they wanted to, because "land was so bountiful as to be practically worthless"; which, as a side note, I find hilarious because, like the political economist Karl Polanyi tells us, land is a fictitious commodity that we imbue with exchange value rather than having some natural 'value'. Puritan colonists trying to tax land they've colonized for education is a great example of what Polanyi calls the enclosure movement that makes everything that isn’t a commodity into commodities. But I digress!
A century later Thomas Jefferson, the slave-raping founding father, thought there should be public schools paid by taxes on people with too much authority, like priests and nobles, who he said "will rise up among us if we leave the people in ignorance." His idea was that we need to tax nobles to pay for education to keep the nobles down, which is kind of smart: you take their money to fund a policy that educates the under-classes and makes them better equipped to keep the nobles in check. This confrontational aspect of the property tax forms one horn of the dilemma.
By 1825 there was some agreement in the US that indeed, there should be public schools and, yes, they should be paid for by taxes on property, but in that moment they argued for property taxes because it was the only tax that could be "administered locally with any degree of efficiency" and, because the economy was mostly agrarian, there was a lot of value there.
But just as Jefferson had alluded, there's an inherent class conflict in property taxes to fund schools for everyone. A tax on property within the boundaries of a school district, whose revenues finance education for everyone there, means that the property-owning class within that district has to pay for schools that serve everyone, even poor and working class people. They didn't want to do that because (a) they didn't want to give up their money and (2) they benefit from a dumber working class. And there were policies on the books, also grandfathered in from imperial England, that the American bourgeoisie were happier with: rate bills to fund pauper schools, as well as charity schools.
Pauper schools with a rate bill worked like this. If you sent your kid to a pauper school, you had to register with the state as a pauper. You declare yourself poor. Then the state taxed you according to the rate that it set for the purpose, which would go to the school. You can imagine these schools were very poorly funded and people didn't want to declare themselves as paupers. The 'rate bills' providing these funds were based on a tax rate on parents sending their kids to the schools, decided by the state to provide funds for programs. But it wasn't a property tax policy, it was more like a state tuition program for poor schools. There were also networks of charity schools that the government encouraged, and rich people, if they wanted to, could donate to these charity schools. Or not.
So the property tax to fund schools was a working class policy. In Ohio, there was a gradual but "inexorable" push for this tax "paralleling the desires of citizens to extended educational opportunities," writes Walker. In New York state there was a big debate between rate bills and the property tax. New York City abolished the rate bill in 1832, but the state kept the policy until 1867 when working class advocates finally got the property tax enshrined at the state level.
There was a more protracted fight in Indiana between its unique mixture of Northerners and Southerners in the early 18th century. The Northerners pushing for a strong state concept coming out of New England, where the property tax for public education was more common, and the Southerners defending their "ideals of pauper and charity schools." The fight between these two lasted almost 40 years but the Northerners and their progressive push for property taxation finally won out in 1851. The property tax for schooling won out as the predominant way to fund schools. But there’s a second part of this story that complicates this victory, which made the property tax what it is today: home-rule charters and zoning.
The battles over the property tax happened at the state level. More working class groups fought in Indiana and New York and Ohio to get the state to collect a property tax funding schools. Perhaps in response to this more redistributive approach to the tax, it became more localized—and became a creature of ‘local control’ rather than state distribution.
Whereas the property tax story starts in ancient times, the story of home-rule charters and zoning starts in and around American cities in the mid-19th century. These cities had suburbs, but were resource poor. To make better decisions about resources and planning, municipalities began to set up home-rule charters that gave them more autonomy from state governments. Missouri was the first to give a city this status with a charter in 1875. Nearly every state would follow suit, and municipalities thereby got the ability to maintain their own streets, parks, recreational facilities, provide police and fire protection, plats, construction standards, and tax local residents to finance their projects. Between 1875 and 1950 millions of municipalities would establish home rule in the United States.
Suburbs needed home rule so their school districts, rather than the states, could levy taxes on the property in their purview. In Colored Property: State Policy and White Racial Politics in Suburban America, David M. P. Freund (2010) writes that “[h]ome-rule provisions were by no means meant to segregate by race. Nonetheless they provided affluent suburbanites with a means to separate themselves jurisdictionally from populations seen as socially and even racially suspect” (p.48). Without home rule, predominantly white school districts could not set their own millage rates, for instance.
But we know that school funding comes from how these municipalities tax property, specifically taxes on the assessed value of property. Key to this set of practices is zoning, or making sure that certain parcels of land are used for particular purposes (whether industrial, commercial, residential, public, etc). Dovetailing with the home-rule movement was a movement that tried to protect homeowners from the rapidly growing urban sprawl of industrialization in the early 20th century. At the beginning of this trend was Benjamin C. Marsh, who was a member of the Committee on Congestion of Population (CCP) founded in 1907 in New York City.
This group of nascent urban planners took a trip to Frankfurt, Germany and saw its zoning system. Marsh was impressed and advocated such a system in the US. The CCP formed the National Conference on City Planning to encourage scientific thinking about “best use” practices for land in increasing industrialization. In An Introduction to City Planning: Democracy’s Challenge to the American City, Marsh and George Burdett Ford would write that “The most important part of city planning, as far as the future of health of the city is concerned, is the districting of the city into zones,” (Freund 2010, p. 50).
The real estate industry liked this and forged an alliance with urban planners that would last until this day. The National Association of Real Estate Boards (NAREB), founded in 1909, created the City Planning Committee in 1914, which “urged local and state governments to provide legal and financial support for planning” and popularized the zoning concept (Freund, p.52). For all its alleged promise as a democratic practice, at least to the planners, zoning was also a racial practice. Freund writes that “[r]acial science figured prominently in the early planning movement because urban congestion and unregulated development were often associated with migrant blacks, immigrant Asians, and immigrant Europeans, the populations whose cheap labor (and often squalid living conditions) made the era’s rapid industrial and commercial growth possible” (p. 55). Eugenic views of racial difference, rooted in biological science, were held by powerful leaders in government and economy, including planners.
Zoning, from its outset, was racialized and used to make structurally racist interventions. The Supreme Court of the United States showed an awareness of this feature of zoning ordinances, ruling against the practice of racial zoning in a 1917 case Buchanan v. Worley. However the alliance between real estate and the planners was effective. Between 1921 and 1925, the number of municipalities adopting zoning ordinances went up tenfold, from 48 to 425. By then, 27 million people lives in zoned municipalities. The ground was readied for a change in the Supreme Court’s thinking. In the Euclid v. Ambler case, the court overturned the Buchanan ruling. Citing the concept of nuisance as a factor in their decision, they said “a nuisance...may be merely a right thing in the wrong place, like a pig in the parlor” (Freund, p. 83). In the dissenting opinion, judge D.C. Westenhaver wrote that “[t]he result to be accomplished is to classify the population and segregate them according to their income or situation in life” (Freund, p. 83). And that is exactly what happened.
After this juridical victory for the planners and real estate industry, zoning would spread to 800 cities by 1930. Ten years later 1,500 counties, cities, and regions in the United States would be zoned. Municipalities could levy taxes for things like schools with home-rule charters. Those municipalities could adopt zoning ordinances to determine how land was used, sold, and built upon. Planners and real estate agents could generate proposals, legitimated by the “science” of the day, to parcel out that land according to the demands set forth by property markets.
Thus the current racial capitalist logic was born. Residents want to own homes in good neighborhoods where the property values are high, and they want their kids going to good schools unblemished by the presence of those who, by dint of the social forces born before and after 1929, were kept out of the American Dream. All the graphs from the beginning of this section make a kind of terrible sense in this context. As Tegeler and Hilton (2018) confirm:
Shared municipal authority over land use and school assignment...can exacerbate these patterns of segregation and school sorting, as school districts’ local zoning boards practice exclusionary zoning to prevent the entry of lower-income students into affordable housing in the district, thus ensuring a higher tax base, higher test scores, and a well-resourced school system for local students. (p. 438)
You might say, based on Walker's history, that abolitionists were fighting to pass the property tax for public education, and it was abolitionists who got that tax put in place in states, at the state level, around the country, making it normal and natural. But now I think the more intuitive abolitionist position is to get rid of this whole arrangement. Either we try to force the property tax back to the state level or we abolish private property itself.