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CounterPunch
January
30, 2003
Looting Public
Education
Stealing Money
from Kids
by RUSSEL MOKHIBER
and ROBERT WEISSMAN
If there's one thing that brings together the
right and the left, and citizens and corporations, it is the
importance of education -- for stimulating the intellect, developing
a moral sensibility, enhancing the civic culture, enabling a
skilled workforce and creating a sense of community.
The question is: Who's willing to pay?
Not big corporations.
They instead demand cities and states
offer tax breaks before they will invest in new plants and facilities.
Those tax breaks, frequently in the form of property tax abatements
or what is called tax increment financing (TIF, a long-term diversion
of certain areas' property taxes to corporations investing in
those areas), deprive schools of money.
Property tax breaks often directly siphon
money away from schools, which rely heavily on property taxes
as a revenue source. According to "Protecting Public Education
From Tax Giveaways to Corporations," a report issued last
week by the National Education Association (NEA), local property
taxes constitute 65 percent of all local education funding, and
29 percent of all school funding, including local, state and
federal contributions.
Property tax abatements and TIF districts
cost schools hundreds of millions of dollars a year, at least.
Case studies in the NEA report, which
was conducted by Good Jobs First, the leading organization studying
state and local business subsidies, show that abatements and
TIF districts cost schools in Texas $52 million a year. Montana
schools lose $16 million a year in revenues to business tax subsidies.
Abatements and TIF reduced or diverted property tax revenue for
Ohio schools by $102 million in 1999.
Poor reporting rules and the diversity
of jurisdictions and tax revenues make it almost impossible to
determine a total cost to schools from business tax breaks.
However, some estimates have tagged the
cost of local and state subsidies to business as high as $50
billion annually. This is an estimate of the total cost, not
just the amount borne by schools, and some states reimburse schools,
in whole or part, for revenues foregone due to property tax breaks.
The NEA report offers three recommendations
to redress the problem highlighted by the study. First, there
should be improved disclosure of subsidies and enforcement of
conditions attached to subsidies. Second, local school boards
should have a formal say -- up to and including veto power --
over subsidy decisions. Third, states should prohibit the abatement
or diversion of the school portion of property taxes.
This all seems logical enough to us.
What the report did not do was suggest
what corporations' role should be in these matters. Since corporations
drive the "bidding for business" game, this is an important
question.
Since companies so heavily emphasize
the importance of a skilled workforce, shouldn't corporations
simply be willing not to ask for property tax abatements?
We decided to call up the U.S. Chamber
of Commerce and find out.
We asked Marty Regalia, the Chamber's
chief economist: In light of the impact on schools, should companies
stop seeking tax breaks from cities and states?
That proposal, he said, is "blatantly
un-American." (Yes, they really talk this way at the Chamber.)
No one forces cities and states to give
tax breaks, he said. They are competing for a benefit -- new
investment -- and they choose to enter the competition. If they
think it is a bad deal, they are free not to offer tax breaks.
"Local communities do not give away [tax breaks] at gunpoint,"
he said.
There is some truth to Regalia's point
that cities and states are free to decline to offer tax benefits.
The problem, though, is not just that
most government officials are spineless and/or indentured to
business, but that there is an inherent difference in bargaining
power between government and business. The companies have the
power to decide where to locate. And even though most threats
to move factories or offices are bluffs, in some cases, a tax
break may influence a decision to locate in this town or the
one next door.
However, property tax breaks and benefits
virtually never determine whether or not a company of any size
is going to undertake a new investment.
In the bigger picture, and based on the
rules of the game, the outcome is always the same: the cities
and states collectively lose tax revenues, the investing company
always saves money that it would have been willing to pay in
taxes on investments it would have made anyway.
This all comes at the expense of education,
among other important government spending priorities.
The tax breaks are taking money from
kids as sure as the schoolyard bully stealing classmates' lunch
money -- just on a scale so large that few have been willing
to call it by name.
Russell Mokhiber
is editor of the Washington, D.C.-based Corporate Crime Reporter.
Robert Weissman is editor of the Washington, D.C.-based
Multinational
Monitor, and co-director of Essential Action. They are
co-authors of Corporate
Predators: The Hunt for MegaProfits and the Attack on Democracy
(Monroe, Maine: Common Courage Press, 1999.)
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