Since the School Board has officially sent its funding request for a new consolidated middle school facility to the Board of Supervisors, spirited public debate on how to best service the estimated $45 million debt has become common. From workplace water coolers to traditional fast food breakfast groups and social media comments, local people are sorting through the issues, facts, and ideological myths. In the process we’re learning more about the meaning of wrapped debt service, how much the average family will pay in increased taxes (about $8 per month), and the local revenue levers supervisors can pull to help fund our children’s futures. In some instances the debate has singled out low-income taxpayers as not adequately carrying their weight. The perception is that higher earning “makers” will have to unfairly subsidize the “takers.”
Part one of this series briefly alluded to structural economic and demographic challenges communities such as Pulaski face. State educational funds cannot be used to finance school construction. That means localities are entirely dependent upon local revenue sources and taxpayers to fund school capital projects. One way to expand the revenue tool box is to further explore the linkages between school building and community development strategies. Increasing economic activity could help broaden the real estate tax base, attract young professionals who will form new families, and generate new meals and occupancy tax revenues. First, however, it seems important to explore the socioeconomic idea of “makers” and “takers.”
Unfortunately, much of this structural dynamic has been overlooked in favor of a more personal assignment of blame. The misguided maker myth actually spans the political spectrum and treats as fact the notion that the debt burden won’t be shared equitably by economic classes.
The basic structural problem is that communities like Pulaski have limited options in school funding. The economic conditions that depress property values also limit the amount of money the locality collects from other revenue sources like personal property taxes. Areas like ours have fewer vehicles overall and fewer vehicles assessed at higher values. We also have fewer consumers in general and few with high disposable incomes. We therefore have less economic activity to generate consumer tax revenue.
Unfortunately, much of this structural dynamic has been overlooked in favor of a more personal assignment of blame. The misguided maker myth actually spans the political spectrum and treats as fact the notion that the debt burden won’t be shared equitably by economic classes. The perception is in part due to a false dichotomy between our community’s economic “makers” – upper and middle income earners – and the “takers” – lower-income households. To correct this perceived inequity some have expressed a desire to more fairly distribute the debt burden so that homeowners are not expected to pay everyone’s way. The assumption is that lower-income people who are believed to be living off food stamps and housing vouchers but whose families make up a disproportionate number of K-12 students, won’t have to pay. On one hand the idea of spreading the tax burden out makes sense. Everyone will benefit from the new school, so everyone should contribute. In the interest of fairness, there are numerous practical challenges and latent contradictions that should be explored more deeply and ultimately dispelled.
To reiterate a point from Part I, Pulaski County’s division-wide free/reduced meals rate during the 2016-17 school year was 55% or 2,104 K-12 children (source: VADOE). To qualify for free lunches a household can have income at or below 130% of the federal poverty level. For a family of four, a household earning annual income of $31,590 or less receives free lunches. Those who receive reduced priced lunches can have income at or below 185% of the federal poverty guideline, or $44,955 annually (Source: Federal Register). In Pulaski County 50% of the students hail from households at or below 130% of the poverty level and 5% are between 131% and 185%. While it’s not possible to drill down into this data any further, it’s safe to assume that a significant number of free/reduced lunch households would be classified as the “working poor.” This means they have earned income and pay a variety of federal and state-wide taxes like FICA and Medicare withholding, sales tax when they purchase household items and groceries, and if they own a vehicle to get to and from work, gas taxes. It also means they pay a variety of local taxes that help fund schools such as meals tax when they eat out, personal property tax on that employment-enabling vehicle, and the 1% local portion on all purchases at Walmart. Nationally, as a percentage of their income, poor people, like everyone else, pay their fair share in taxes – (PBS News Hour). This is especially true on the local taxation level.
Furthermore, in the current 2016-17 fiscal year the county projected 36% of revenue ($15.8 million) from real estate tax and 26% ($11.2 million) from personal property taxes. Other consumer taxes like meals, occupancy, sales tax, etc. make up another 18% or $8.1 million. Those projections are based on historical data and indicate the other revenue sources to which low-income earners pay are already contributing significantly to the school system’s local funding.
It has been suggested that simply raising the real estate tax rate would saddle a minority of Pulaski County “maker” households with debt repayment while a majority of “takers” would pay nothing. In fact, according to the U.S. Census Bureau’s 2015 American Community Survey, 71% of Pulaski County’s housing units are owner-occupied. Conversely, 29% are renter occupied, in which case they make monthly rent payments to a residential landlord who uses that rental income to pay their property tax. In reality every Pulaski County resident, both homeowners and renters, contribute to real estate tax revenue. The majority make those payments through another entity. Homeowners pay monthly to a mortgage lender while renters make lease payments that are turned into property tax payments. Also of note is that 94% of all occupied housing units have at least one vehicle. Nearly all Pulaski County households contribute to school funding through the “car tax.”
It seems wholly unfair to characterize poor people in Pulaski as “takers” and those who own homes as “makers.” It’s hard to understand why we often hear our poor neighbors held in such contempt as if they are to blame for the inaction and mistakes of past elected representatives and government officials. Poor people certainly haven’t been the ones serving as elected officials on the school board or the board of supervisors. They weren’t executives at Pulaski Furniture whose business decisions led the company to be sold to a private equity firm. Those wealthy investors eventually merged Pulaski Furniture with two other furniture brands and shutdown all domestic production. Our low-income neighbors didn’t decide to close the Caterpillar plant and move production to a Pennsylvania plant. As a broad economic group the so-called “takers” haven’t made the decisions that have led to our current challenges.
Instead of unfairly and inaccurately singling out lower-income residents for not pulling their economic weight, we should acknowledge the failures of so-called middle and upper income decision “makers.” After all, given the history and lack of voice our poor neighbors have had, understanding and acknowledging the the ways “makers” have contributed to our current economic challenges is fair and useful. It would go a long way and represent an important step as we begin working across economic divides to craft a brighter future that broadly benefits all our families and neighbors.