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Here’s Where the GOP Tax Bill Could Hit School Funding the Hardest

December 18, 2017
Andrew Ujifusa
Education Week Politics K-12

The most significant change for schools in the Republican tax reform plan is likely how state and local taxes are handled because of its potential impact on school funding. But why? And where could it have the greatest impact? Buckle up.

Here’s a bit of background: The final bill agreed to by a group of House and Senate lawmakers on Friday imposes a new cap of $10,000 on deductions taxpayers can take for either property and income taxes, or property and sales taxes. That’s much less than what some people, particularly in high-tax states, can deduct now. However, the standard deduction is doubled in the bills, meaning some taxpayers may no longer take state and local tax deductions yet still benefit.

Regardless, state and local governments effectively get a “discount” when they collect revenue. That’s because residents can use the state and local deductions they can currently take to reduce their overall tax burden. Under the final bill, that aforementioned discount could be reduced. That could mean flat or reduced tax revenues, and therefore flat or reduced funding for public schools. Right now, 28 percent of federal taxpayers take state and local deductions.

Click Read More link for a map illustrating, for each state, the share of taxpayers claiming state and local tax deductions, the average value of the state and local tax deductions claimed, average per-pupil spending, and the share of that spending from state as well as local sources: