Equity

Little known is that since the No Child Left Behind Act (NCLB) was passed, the federal government has prioritized "school finance equity" as a goal for states to achieve. In fiscal year 2008, 21 percent of NCLB Title I funds will be distributed based on an Education Finance Incentive Grant formula, a funding stream that has been increasing since NCLB first passed. But few people understand why certain states are deemed more "equitable" than others. You hear a lot of praise and criticism about equitable school funding, but little explanation of what it means or what produced it.

School finance equity typically measures how much per-pupil expenditures vary across districts within a given state. Greater equity means less variation. Sounds simple, but there are many different formulas used to calculate it, and their specifics can be quite complicated (remember statistics and weighted coefficients of variation?). The federal government has its own definition of school finance equity, which you can read more about here from www.EdBudgetProject.org.

Some states are more equitable than others for two basic reasons: (1) decisions made at the state level about how to distribute funding, and (2) the size and number of school districts within a state.

On 9/6/07, the House Ways & Means Committee held a hearing on Fair and Equitable Tax Policy for America's Working Families. The emphasis was on the AMT, the future of the 2001 tax cuts, and carried interests.

What about these inequities?

1. Allowance of a mortgage interest deduction on up to two homes and on mortagages totaling up to $1.1 million. There is no reason to allow a mortgage interest deduction on a home other than one's principal residence and the debt amount is too high. Even in Silicon Valley, the median home price is not $1.1 million.
2. Fantastic benefits for employees who have employer-provided health insurance and health care. The benefit generally is not taxable to the employer and the employer gets to deduct the cost.

These are two examples of "tax expenditures." They cost the government in terms of lower tax collections. However, they are not direct spending so they do not show up on the budget expenditures. But, they are the equivalent of spending. Example: The government could give write a check to homeowners to help subsidize the debt on their home or they could give them a tax deduction of that would result in the equivalent amount.

These tax benefits are worth more to individuals in higher tax brackets - those with higher incomes.