To help the district, tax the rich
Something really interesting happened last week that’s going to have a big impact on school funding and education in the city generally. It had to do with a big debate over local taxes spurred by a number of factors, one of them being a recent property value reassessment that saw property values rise exponentially. In some places, they more than doubled. (My house doubled!) The increase means that homeowners will pay a lot more on their yearly property tax bill and landlords will pass the increase along to their renters, increasing housing costs. It’s a big deal.
After lots of serious critiques and complaints, the city is trying to figure out whether/how to ease this property tax burden and still have enough in its coffers. Options have included redoing the assessments or increasing certain kinds of exemptions that give people a break on a certain amount of the property's value if they live in it as a primary resident, like the homestead exemption. At the same time, the city is figuring out what to do in the wake of the pandemic crisis that’s both ‘over’ and also still ongoing. The question is: how should the city get the right amount of revenue to run itself? Who should be taxed and how much? The property reassessment is part of that.
The property tax increase hits everyone, though perhaps disproportionately middle and working class people who spend a big portion of their income on housing. Historically, while these kinds of taxes go up, taxes on the ruling class—rich people that can more than afford it, but prefer not to be taxed—don’t. The city’s Chamber of Commerce is their advocate as they push for tax cuts on businesses, like the business income and receipts tax (BIRT) and the wage tax. The whole local tax question tends to be kind of one-sided in that way, favoring the rich who can buy politicians, threaten to take their capital out of the city, or even, in the case of Allan Domb, serve on city council while being a real estate mogul.
But this year was different. Thanks to the work of a new-ish left revenue group, Tax the Rich PHL, led by the inimitable Arielle Klagsbrun of the Action Center for Race and the Economy (as well as local labor leaders, Philly POWER Research, Neighborhood Networks, Philly DSA, and others), the debate this year has been far from one-sided. Tax the Rich, partnering with the PA Budget and Policy Center, has put out reports on and proposals for on a wealth tax on intangible assets, championed by the amazing socialist city councilmember Kendra Brooks (which even inspired a visit from Elizabeth Warren). Marc Steir and Eugene Henninger-Voss find that such a tax on .4% of intangible wealth in the city would generate $200 million a year for the city.
What does this have to do with schools? A lot. The city contributes nearly half of the school district’s revenue, so an increase in city revenue means potential increases for the schools. Taxing the rich can help the district.
The district weighs in
Things came to a head Wednesday when district leadership decided to get involved. Outgoing School District of Philadelphia Superintendent William Hite and Chair of the Board Joyce Wilkerson waded into the city’s tax policy debate with an op-ed. They basically asked the Mayor not to decrease the property assessments. Remember that the district is funded primarily through property taxes. So if the city reduced its property tax revenue, it hurts the district's budget. They were pleading the city not to underfund the district. Some background: the district actually can't levy its own taxes, which is abnormal. Typically, school districts are given the power to increase or decrease the property tax since that its main revenue stream. School boards can vote to change the millage rate (how many dollars taxed per thousand dollars of property value) to match the district's needs any given year.
But the SDP can't do that. The city government makes this decision and then gives money to the district. Also important to note is that the Board of Education is appointed by the mayor, as is the superintendent. So the school district is a little more like a Department of Education in the city government than a standard district. So I found it interesting that Hite and Wilkerson advocated for keeping the property assessments up, both politically and economically.
A partisan for Tax the Rich's approach in the debate, I tweeted that I disagreed with Hite and Wilkerson. Rather than advocating for increased property taxes that would hurt the working and middle class families they serve, I said they should rather advocate for taxing the rich. Not only would the wealth tax create $200 million a year, part of which the city could put towards schools, they could push the city to better enforce the school income tax on unearned income. Early in Mayor Kenney's second term, the Revenue Department found that the school income tax was under-collected. The head of revenue for the city Frank Breslin announced that an extra $4 million of unearned income tax had been sitting uncollected, which the Department was able to find using new software. And that was back in 2017.
I thought that with increased school income tax enforcement, along with a portion of a reinstated wealth tax going to the district, the city could generate enough to cover the losses Hite and Wilkerson worry about viz. property taxes. But my tweet was not appreciated by several heavy-hitters in Philly school funding. Unpacking their responses opens a fascinating can of worms about local school finance and helps carve out what a socialist position in this debate would be.
The role of the district
I was arguing that the district should ask the mayor to tax the rich rather than working and middle class residents via the property tax increase. One main issue with my argument that came up was that the district shouldn't advocate for any specific kinds of revenue streams, it just to try and get as much as money as it can no matter where it comes from. Uri Munson, the district's head of finance; Mallory Fix Lopez, a member of the school board who worked on the op-ed; Dan Urevick-Ackelsburg, lead lawyer on the recent school funding lawsuit at the state level--all of them replied to me saying it shouldn't matter to the district where money comes from, just that it's getting enough.
A couple things to say about this argument. First, it's politically technocratic to say that it's not the district's role to advocate for certain funding. In this perspective, the district just isn't the kind of entity that advocates for certain tax policies. I don't understand this argument, since the op-ed was arguing for a specific tax policy in the form of keeping the property reassessment as is. How can you say it's not the district's role to advocate for specific taxes when the op-ed was clearly advocating for a specific tax? Of course, the property tax revenues go to the district, so maybe you could say it's the district's only option. But a number of other excise taxes go to the district grant from the city, including taxes on gambling, cigarettes, and soda. Finally, this technocratic argument assumes that it's possible for a school district to be neutral or non-partisan in tax policy, which I don't think is possible by definition. I guess you could also say that the district should only be interested in educating kids and related policies, not housing policy. But as we know from Jean Anyon's famous essay from 2005, housing policy is education policy. This prompts an instructive question: Let’s say a family’s property taxes go up by 2x. They can’t afford their house anymore and have to move, get another income, cut costs, etc., to pay their property taxes. The tax money goes to the kids’ district for its budget. Which has the greater impact on a student’s education? Even if instruction gets better, if students' housing is bad then it might not matter.
Second, the argument that it's not the district's role to advocate for specific tax policies doesn't make much sense economically. If district officials should be out there making the case for funding the schools no matter where the money comes form, then they should advocate all possible taxes that would do so, including taxing the rich. I think Hite and Wilkerson could easily have included the wealth tax and school income tax enforcement in their argument. Why wouldn't they?
Here we have a third insight about this argument: politics. The district officials don't have much autonomy from the city government. Saying it's not the district's role to advocate tax policy is to also say that it's not their place to do in the pecking order. I guess I understand this point given the subordinate status of the district officials. At the same time, this particular budget fight is unique in that both the mayor and the superintendent are lame ducks. They could've taken a chance and pushed for a more progressive tax policy. Hite wasn't exactly about to do this though, since his next job is teaching at the Eli Broad Foundation's outpost at Yale University. Certainly not a bastion of progressive thought. Also, the idea didn't have strong purchase in the terrain. Brooks' bill on the wealth tax didn't get a vote in city council. In the twitter thread, Urevick-Ackelsburg called the wealth tax proposal a "non-starter," by which he meant that the political class would never consider confronting the capitalist class in the city in this way. He's wrong in principle--socialists can certainly pressure on tax policy, just look at what Tax the Rich did this cycle--but he's right in practice given that the wealth tax didn't get very far in the negotiations. I told him and others to have some courage and to stand up for working class people anyway!
To me, the socialist position here is for the district to call for taxes on the rich. It's a public school district serving the diverse working class of the city. It should side with its people not the powerful. Further, property tax policy is education policy. If kids' housing becomes unstable that impacts their ability to learn. There's no such thing as neutrality and, particularly given the lame duck superintendent and mayor, they can and should push the envelope on revenue streams to the district locally. At most, Hite and Wilkerson should've pushed the Tax the Rich line. At least, they should have included it as a possible revenue stream for the district in the op-ed.
Have heart
As a coda, it turns out that the district leaders' op-ed was extremely well-timed. No one quite knew how city council and the mayor would come down on the tax framework this cycle. Would the capitalists win the day? Would there be a left turn with property tax relief and no tax cuts for the ruling class? Would the wealth tax make a come-from-behind victory? The tax debate ended in an 11th hour council meeting last week that saw some interesting last-minute moves. The homestead exemption was increased to $80,000, which is pretty high but not as high as it could go. In a hat tip to the capitalists, there were very small cuts to the BIRT and wage taxes. And no wealth tax of course.
This is a pretty good outcome from the left position, all told. There's relief on property taxes and a not-so-meaningful nod to business tax cuts. The district gets to keep the reassessments in place. Still suffering from underfunding, at least the city isn't going out of its way to prevent money from coming in for schools. I still think the wealth tax and SIT enforcement would bring in that revenue. But we should have heart: Tax the Rich made a strong showing this cycle, perhaps the first time an explicitly leftwing tendency made a sizable impression on the budget terrain. What could socialists do next time for local school funding, particularly given a mayoral election and a new superintendent? What if socialists organized a coordinated campaign to pressure the school board and superintendent to support taxing the rich next time? Maybe they could use their leverage and step in at the last minute to confront capital and get more money for schools. Let's keep fighting!