Investing in Public Education

Pays

TEF Lessons for Members and CitizensLesson 6

6-1

Objectives

Participants will:•Learn the story behind our current

economic crisis; •See how corporate tax cuts hurt public

education funding; and •Review why investing in public education

provides more economic growth and a greater investment return than tax cuts.

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As a group can we agree that we will:

1) Respect and value differences of opinions and varying levels of knowledge

2) Be attentive

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The story begins with: THE RELATIONSHIP

“The relationship between the business community and public schools is…”

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6-5

A quality education system depends on a strong economy…

Because education needs business taxes to fund schools.

A strong economy depends on a quality education system…

Because business needs qualified workers that schools provide.

American business and public education: Both face serious challenges

• Business: needs a highly skilled and innovative workforce to compete in the new global economy.

• Public Education: needs a modern infrastructure and resources to attract and retain a highly qualified workforce and meet the needs of an increasingly diverse student body.

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What’s changed?

• The Economy. Knowledge-based. Now the best investment is in human capital.

• Over 50% of teachers leave within their first 5 years.

• Education funding isn’t keeping pace with the increasing costs of education.

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NEA Research analysis of US Census Bureau data; Values adjusted for inflation (2010 dollars) using Bureau of Labor Statistics CPI calculator, available at: http://data.bls.gov/cgi-bin/cpicalc.pl

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Many of the current economic conditions that are creating massive cuts in our

public education budgets, are a result of the economic policy agenda implemented

in the 1980s:• Privatize

• Deregulate

• Cut Taxes/Shrink Government

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Privatize

• Government outsourcingExample: hire bus companies to run school

buses instead of hiring school board employees directly.

Example: hire a corporation to run the school cafeteria instead of hiring school board employees directly.

• Tuition Tax Credits and Vouchers: Using public dollars to fund private schools to increase “competition”

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Deregulate

• Governments removed, reduced, or simplified laws on business.

• This resulted in less government oversight.

• Think about the financial crisis and the housing bust precipitated by lax regulations.

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Tax Cuts Really = Tax Shifts

1. From progressive to regressive taxes

2. Decreasing taxes on wealth andincreasing taxes on work

3. Taxing corporations less and taxing individuals more

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Corporate Effective Tax Rate

Personal Effective Tax Rate

Source: Bureau of Economic Analysis, National Income Accounts. Corporate profits from Table 1.12, “National Income by Type of Income;” Corporate income taxes paid to state and local governments from Table 3.23, “State and Local Government Current Receipts and Expenditures, Not Seasonally Adjusted;” Personal income and personal taxes paid to state and local governments from Table SA50, “State Annual Personal Income.”

Trends in Effective State & Local Income Tax Rates,

1980-2007

Since the late 1970s, corporations were granted short-sighted tax cuts and incentives that ultimately erode the funds needed for quality schools, which impacts their own pipeline for quality workers.

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• Lowe’s deducted $833 million in rent payments to itself and reduced its Alabama income tax liability by $25 million

• Abercrombie and Fitch deducted over $200 million in royalty payments to itself and reduced its Alabama income tax liability by almost 90%

• McDonald’s received a $466,000 check from the federal government to market Chicken McNuggets in the country of Turkey.

• Over 90% of Wal-Mart’s distribution centers received taxpayer subsidies totaling more than $1 billion (meaning a $1 billion cost to taxpayers) 6–16

EXAMPLES OF WHAT SOME COMPANIES COST PUBLIC EDUCATION

The vicious cycle of the BIG BOX with tax breaks…

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Small businesses and the average citizen do not have the money or political clout to influence legislation providing similar exemptions, so we are left paying higher taxes while unaccountable, global corporations are given an unfair advantage.

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Corporation Wannamove

A One-Act Role Play

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Activity Debrief

1. What was the determining factor for Corporation Wannamove’s choice of State A?

2. Is this a common occurrence?

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In Fact, Firms Report that the Quality of Available Labor is their Major Concern

When Making Relocation Decisions

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Source: Robert M. Ady, “The Effects of State and Local Public Services on Economic Development,” New England Economic Review, Federal Reserve Bank of Boston, March/April, 1997.

23

Top 10 States in Business Climate Ranking

& Per Capita Income GrowthAdjusted for Inflation (2008)

Business Climate Rank

1998-2008State PCPI Growth

1998-2008Growth Rank

1 NC 0.5% 472 TX 1.6% 163 GA 0.2% 504 OH 0.3% 495 FL 1.4% 246 MI -0.1% 517 TN 0.8% 408 SC 0.9% 399 IL 0.9% 37

10 VA 1.7% 14

Site Selection Magazine’s Annual ‘Business Climate’ Rankings (1998-2008)

Business Climate Ranking from Site Selection Magazine, for 1998-2008; Per Capita Personal Income data from Bureau of Economic Analysis, Regional Economic Accounts, for 1998-2008.

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Average annual growth 2003-0810 States with highest taxes as a percent of income shown in red10 States with lowest taxes as a percent of income shown in blue

Source: U.S. Department of Commerce, National Income and Product Accounts, 2003.

Direct Labor 48.0%

State Corporate

Income Taxes 0.27%

0%

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Shares of Total Business Costs

Richard G. Sims Sierra Institute on Applied Economics

Compared to labor

costs taxes are just not

that significant

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Telling it like it is…

26

Watch the video…

• For many years we’ve had one recipe for economic growth: cut taxes. We’ve seen that this hasn’t produced the long term, stable prosperity we’d hoped for our communities.

• Corporations aren’t intentionally trying to hurt public schools. However, by continuing to advocate for tax cuts and incentives they are removing the very funds needed to make their communities prosperous, desirable places to live, work and play. 6–27

So what does all this mean for educators?

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It’s no longer enough for educators to advocate for public education funding, we must be proactive in fighting revenue erosion.

“I simply want to reduce government to the size where I can drag it into the bathroom and drown it in the bathtub.”

Grover Norquist, Americans for Tax Reform Interviewed on National Public Radio, 5/24/01

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The Economics of

Public Education: What Every Educator Should Know!

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REFLECTION

1. Were you aware that investing in education provides greater returns than tax cuts?

2. What does this mean for you? For your students? For your community?

3. How might you act on this knowledge or awareness?

6-31

Schools are being held accountable for results…

When they lack the capacity to deliver those results…

When funding is inadequate and inequitable…

When tax structures are out of sync with the economy…

School Capacity

School Funding

Economy & Tax Structure

Public Support

And not everyone is aware.

Accountability

MAKE THE TEF CONNECTION

6-31

A few examples…

This video address from Alabama EA President, John Wright.

Alabama EA sheds light on corporate tax avoidance

in Alabama

Detroit News, Friday, July 25, 2008

MEA Press Release: Drop-outs One Too Many, April. 4, 2008

Honolulu Advertiser, Dec, 2006Honolulu Advertiser, Feb. 2007

Iowa State EA News Article Kentucky EA - School Funding Statement.

Michigan’s Business Tax Incentives: A study commissioned by MEA and NEA to improve the quality of the debate on business tax incentives.

Mississippi EA op-ed piece.

State Affiliate TEF Websites: Colorado, Illinois, Michigan, Mississippi, New Jersey, Oklahoma

States Facing Budget Shortfall – Center for Policy and Budget Priorities (CBPP) reports state fiscal profiles.

State-by-state tax news and policy analysis provided by the Institute of Economics and Policy Analysis (ITEP).

Economic Policy Institute’s (EPI) new report analysis rank states by overall unemployment as well as the change seen since the start of the recession in December 2007.

Enriching Children, Enriching the Nation show state returns in budget, salary, crime reduction by investing in Pre-K thru 12.

Find out how much Wal-Mart is costing your state in subsidy deals, healthcare cost, and property tax appeal appeals.

Combined Reporting, How Does Your State Stack-Up? Institute on Taxation and Economic Policy (ITEP) This reporting requires multi-state corporations to report the income earned by both the parent corporation and all of its subsidiaries and to determine their income tax liabilities on that basis.

Good Jobs First state-by-state corporate subsidy websites.

Studies supporting TEF concepts:

• The Effects of State Public K-12 Expenditures on Income Distribution

• K-12 Education in the U.S. Economy

• Protecting Public Education from Tax Giveaways to Corporations.

• School Funding, Taxes and Economic Growth

• TEF Series

Why invest in education makes sense:

Enriching Children, Enriching the Nation

Corporate abuse:

The Great American Job Scam - corporate tax dodging and the myth of job creation.

Your Tax Dollars At Work…Offshore - foreign outsourcing firms are capturing state government contract.

No More Secret Candy Store - A grassroots guide into investigating corporate subsidies.

Publications1 2State affiliates in TEF Action

3

TEF Tools and Resources

State-SpecificData Sources

TEF Website: http://www.nea.org/tef

6–33

NEA Information on establishing a social networking site to use as an organizing tool.

Others are: (http://www.ning.com/ ) and (http://www.groupsite.com/)

http://www.faireconomy.org/tfoc to locate your state’s tax fairness organizing collaborative. These groups are located in 21 states.

Community Organizing• Business Outreach

Sample Political Action Tools

• Corporate Legislation• TEF Model Legislation

Customizable Tools4 Other

Useful Links5Introducing aNew TEFInteractive Tool

6

TEF Tools and Resources

www.nea.org/tef

TEF Website: http://www.nea.org/tef

6–34

U.S. PIRG on Countdown. Olbermann talks about U.S. PIRG's report "Tax Shell Game.”

Free Lunch, Corp Welfare, Bill Moyers and David Cay Johnston

(9:49)

David Cay Johnston - A History of Government Subsidies (3:08)

David Cay Johnston - Are Government Subsidies Unfair? (4:43)

David Cay Johnston - A Moral Argument for Progressive Taxes (3:04)

Videos

PBS Now, "Taxing the Poor" ((26.03)

Wal-Mart Subsidies (7:48)

Warren Buffett's Tax Rate is Lower than His Secretary's (4:39)

TAXES: Warren Buffett - Rich Taxed Too Little, Poor Too Much (5:17)

Eye To Eye With Katie Couric: Buffett's Tax Code (CBS News) (1:40)

On Taxes…7 On Economic Policies8 Funding for

Schools9

Other Resources

Access Quality Education: School Funding Litigation A National Network of Advocates Involved in Education Finance Litigation,

Abbott vs. Burke is the New Jersey

Supreme Court ordered a set of education programs and reforms widely recognized to be the most fair and just in the nation.

Videos

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“Our lives begin to end the day we become silent about things that matter.”

— Martin Luther King, Jr.

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