NCPA - National Center for Policy Analysis

Tax Abatements Drain Funds From Schools In Some Cities

July 18, 2001

From Toledo to Memphis and from Louisville to San Jose, tax abatements for businesses are cutting into property taxes local officials rely upon to run public schools, experts warn.

They explain that after Congress lowered federal taxes for businesses and eliminated many tax shelters during the Reagan administration, companies and their tax attorneys shifted their attention to state and local taxes. They concentrated a considerable amount of intellectual firepower on local corporate tax issues.

  • Nationwide, about 45 percent of public-school revenue comes from local money -- most of it from property taxes.
  • While no one tracks property-tax collections by source, many states have recorded a decrease in the load borne by business.
  • Another 48 percent of public-school revenue comes from state money.
  • In that arena, the proportion of state income taxes paid by businesses fell to 15 percent in 1999 from 29 percent in 1979, according to Census Bureau data.

Many businesses contend that schools can be fixed with existing resources and don't need more money. They also say that they are only doing what it takes to compete in a global economy and should not be expected to bear an inequitable share of any tax burden.

Source: Robert Tomsho, "In Toledo, a Tension Between School Funds and Business Breaks," Wall Street Journal, July 18, 2001.

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