Daily Debunk: When taxes entice residents
Good schools attract new residents, and what’s one of the main keys to public education?
Students gather outdoors at social distance over the summer at New Trier High School. (Facebook)
By Ted Cox
Anti-taxers like to insist that residents “vote with their feet” when it comes to taxation.
We’ve already debunked that to a large extent, pointing repeatedly to a study by the Better Government Association finding that, when Illinois raised taxes on all residents a decade ago, it was low-income workers bearing an unfair share of the tax burden who were forced to leave the state, while more well-to-do Illinoisans stayed and prospered.
But a recent opinion piece in Bloomberg News caught our eye, because it looked at the tax-residence dynamic from the opposite angle. Stephen Mihm’s article “Low Taxes Are Never Enough to Attract Wealthy Residents” basically debunked a 62-year-old study by Charles Tiebout that has proved incredibly influential in bolstering that “vote with their feet” argument. Mihm pointed out that Tiebout himself had qualms about his methodology, citing: “In a footnote, he even acknowledged that he was proposing an ‘extreme model,’ where residents chose to put all their worldly possessions into a moving truck with the same carefree calculation that they brought to the purchase of pork chops.”
We’ve cited that repeatedly ourselves, with studies finding that millionaires — like many fellow Illinoisans who choose to stay put — are held by the contacts they’ve made, the places they’ve settled in, and especially the business contacts that in large part provide their livelihood.
But all right, let’s allow that occasionally anyone is apt to pull up stakes and move. In that case, where do they go? What draws them somewhere else?
Turns out, in Mihm’s findings, it’s not low taxes. It’s the value residents derive from the taxes they pay — especially when it comes to good schools. As he put it: “Yes, Tiebout’s ‘consumer voters’ will factor in state income tax and local property-tax burdens when considering a move. But the actual goods and services gained by moving — you know, those things paid for with taxes — also played a constructive role in their decisions.”
Mihm looked to how “a state like Massachusetts, which has very high taxes but the highest-rated public schools, isn’t losing population,” while “states like Mississippi, which has low taxes but poor school systems, are suffering an exodus.”
It’s no different in Illinois. Where are the most valued home tracts in Illinois (sometimes with the highest property taxes)? The suburbs of Chicago. And it’s no coincidence that also happens to be where many of the state’s top school districts are.
When Chicago was suffering family flight in the ‘90s and aughts, the primary way Mayor Richard M. Daley combated that was by building top-rated high schools, a process continued by his successor Mayor Rahm Emanuel, with the result that Chicago now dominates the list of the very best public high schools in the state — a powerful draw for new residents, no matter Chicago’s numerous other problems.
Good schools draw residents, something One Illinois has heard repeatedly from our first days, from politicians like Mayor Chris Lain of Savanna.
And what’s one of the primary keys to good schools, including public universities? Adequate funding provided by adequate taxation, something Illinois public schools haven’t had for decades.
Although we’re trying.
Because that’s the other dynamic Mihm pointed out, citing how critics of Thiebout’s study found that, in the face of heavy taxation and inefficient government, “households vote far more often with heads and hands than their feet.” In other words, they get involved politically and demand change. And that’s exactly what happened three years ago when the General Assembly overrode then-Gov. Rauner’s veto to raise taxes to support a new “evidence-based” funding formula for public education.
The goals of that change were simple: to restore the state to its assigned constitutional role of being the “primary” funder of public education, to balance the scales so that it’s not just well-to-do suburbs with high property values that provide good schools, but every district across the state.
And we’re not there yet.
Voters voted with their heads and hands, not their feet, two years ago in electing Gov. Pritzker under a platform of passing a progressive income tax to adequately fund education and other essential social services “hollowed out” by decades of insufficient funding. The General Assembly elected two years ago endorsed that by a 60 percent supermajority to alter the state constitution to end the requirement of a regressive flat tax and allow a graduated income tax, and now as required by law it goes before the voters in need of the same supermajority for final adoption.
It’s what’s needed to make Illinois a better state and, as it logically follows, a more desirable destination.