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Governor O’Malley Ties Taxes to Educational Achievement

by Emily Washington on February 3, 2012

in Economic Policy, Education, Tax and Budget

Maryland Governor Martin O’Malley has proposed several new taxes that he says are necessary to close the state’s $1.1 billion budget gap.

Image from Flickr user loop-oh

He’s proposing eliminating income tax exemptions for those earning over $100,000 per year along with increased gas taxes, sewer taxes, and a new internet sales tax.

Ben VanMetre argues that these changes are positive reforms to the extent that they make the state’s tax code more neutral. This may be true if the higher gas tax eliminates road spending from the general fund. The income tax change seems more ambiguous though — I’m not sure that I agree that eliminating income tax exemptions for a select group of taxpayers is closing a loophole.

O’Malley is insisting that these taxes increases are necessary to protect Maryland’s quality school system. By some measures, Maryland does in fact have the best public schools in the country. However, a study from the American Legislative Exchange Council suggests that the likely reason for this is that Maryland has a high median income, not because of its high tax rates. Student success is influenced much more by parental income than school spending, the report finds. As a Baltimore Sun editorial explains:

According to an analysis of data from the Annual Survey of State Government Finances from the U.S. Census Bureau, all education spending accounted for 47 percent of Maryland’s total revenue in 2009, the most recent year available. Health spending, which is always cited as the monster in the state budget, ate 9 percent of total revenue in 2009. By comparison, public education represented 26 percent of total revenue in 2000.

The results are sparkly — on paper. Maryland earned the top spot for the third year in a row in Education Week’s survey of the nation’s K-12 public schools last week. But for the wealthiest state in the nation, home to some of the most highly educated parents, it would be surprising if it did not score high. And few know how much that ranking costs at a time when the state faces a $1.6 billion budget gap and legislators are debating whether to raise taxes yet again in a state with one of the largest tax burdens in the nation.

Only 8 percent of Marylanders guessed that the state spends more than $10,000 per pupil, according to a 2008 poll by the Foundation for Educational Choice. According to 2008 data from the National Center for Educational Statistics, the state spends about $15,100 per pupil each year, or about double the cost of tuition at most private and parochial schools.

These results are also consistent with what Eileen Norcross and Frederic Sautet found in their study of New Jersey budget drivers. In New Jersey, the poorest school districts are required to spend as much per-pupil as the state’s wealthiest districts. This sounds like a formula for providing a quality education for New Jersey’s disadvantaged students, but unfortunately throwing money at the problem of poor educational outcomes is not an effective way to improve results. Students in these Abbott districts are some of the most well-funded in the country, yet many of these schools continue to fail their students as they achieve below grade-level test scores and high dropout rates.

Education is not a simple equation in which adding money to school systems provides better results. O’Malley may be able to successfully pass higher taxes in the short term by convincing voters that it’s for the sake of Maryland children. But suggesting that Maryland’s schools perform relatively well because of high tax rates is a misleading statement, detrimental to making real improvements to Maryland schools for the benefit of children from all income backgrounds.

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