Making the students pay? The gross cost of property tax abatement for U.S. school districts

Abstract

ABSTRACT In the U.S., local property taxes fund public education more than any other source, but the revenue cost of property tax abatements for school districts has long eluded capture. This paper finds that at least $2.4 billion was diverted in 2019 to fund tax incentives from just the small percentage of school districts that disclosed out of the 10,370 financial statements reviewed. School board authority in the award process is limited or absent in most cases. Given the cost-inefficiency and cost-ineffectiveness of many awards, the long period of time before profits come in, and the critical need for closing the funding gap in public education, more judicious use of tax incentives is called for. Specifically, we recommend that all states establish independent agencies for reviewing incented projects regularly and rigorously, impose benefit reduction or clawback on underlivering recipients, enable institutions for multiscalar collective action, and maintain oversight of tax abatement reporting by local governments.