Saturday, July 12, 2008

Housing Bubble and Education

Here's something so obvious, I can't believe I didn't think of it before. First: A question. What is the chief source of financing for public education in the United States? Answer: Local funding comes, by and large, from property taxes. Next question: what happens to property tax revenues when property values plunge after a real estate bubble bursts? You guessed it - revenues drop off fast, and with them, so do school budgets (barring unpopular tax rate increases, of course). Given the shortfall and more general need to make up the shortfall in local and state budgets - Mark Weisbrot at CEPR has a rather common-sense proposal to help make up the difference: start taxing sales from online vendors, who are currently exempt from sales taxes.

To forestall the obvious complaint that this could be an accounting nightmare for online vendors selling across the country - my answer is not more more so than for standard brick-and-mortar stores, particularly since UPC codes allow for individual product tracking, and most online vendors are large enough to handle the burden given that they already save on the cost of maintaining physical assets.

More generally, this is just a drop in the bucket compared to a much larger problem - why are we funding public education with property taxes in the first place? Given the inequality (even adjusted for Cost of Living) between property values (even within one county), and given the sheer importance of education as the bedrock of a society... does it really make sense to have the fuel for the system vary drastically by regions? I know there are legal (and arguably constitutional) issues in federal funding and standardization of education... but its about time we looked into the idea seriously. We consistently score at the bottom of the industrialized world in terms of education - and as other countries start to catch-up economically, we won't be able to count on our size to protect our economy (arguably, we already can't). That says nothing of the social, political, and lifestyle benefits of a well-educated population... though those are arguably even more important than the economic ones. Just some food for thought - I'm sure education will become a theme of this blog eventually.