How Corporate Tax Cuts Hurt Public Schools

How Corporate Tax Cuts Hurt Public Schools

Tax breaks for the rich have resulted in less money for schools, creating a financial crisis in public education.

Elementary and high schools in 29 states receive fewer appropriations than they did 10 years ago. Education officials are making up for the shortfall by reducing funding for teachers and classrooms.  

Schools must hold fundraisers and get grants from nonprofit organizations to buy basic supplies and avoid scaling back academic programs. Children in several states have had their studies interrupted by teachers' strikes. Educators are demanding higher pay, more classroom funding and better facilities.

The Center on Budget and Policy Priorities (CBPP) reported that, because of funding cuts resulting from the tax breaks, school districts laid off 351,000 employees between 2007 and 2012. At the same time, student enrollment was soaring.

Nick Faber, who heads a Federation of Teachers chapter in Minnesota, told Truthout that the solution is “a transformational shift” in corporate tax policy. He noted that some of the biggest companies in his state are subject to a tax rate of only 9.8 percent, compared with 13.6 percent three decades ago.

“Wells Fargo paid $15 million less in 2014 than they paid in 1990, when the tax rate was 12 percent,” Faber said. “In 2014, 10 corporations paid $31 million less than they did in earlier periods.” The federal government slashed the corporate tax rate from 35 percent to 21 percent during the same period.

“The old pattern was to get teachers to go to the state capitol, tell our stories, and ask for more money for education,” Faber recalled. “We never talked about where that money should come from. We now understand that we have to demand that money come from folks who have been profiting and getting tax breaks.”

Rob Reich, who teaches political science at Stanford University, wrote five years ago in an op-ed for The New York Times: “Tax policy makes federal and state governments complicit in the deepening of existing inequalities that they are ostensibly responsible for diminishing.” He explained that rich people can subsidize their children's education or send them to private schools, luxuries not available to most low-income parents.

Earlier this year, educators in Arizona organized the most massive teacher walkout in history to protest the state's Republican-controlled Legislature having reduced school funding between 2008 and 2015. According to the CBPP, the cuts drove down state expenditures for kindergarten through 12th grade in public schools by 36.6 percent – more than anywhere else in the country.

As the Grand Canyon State's corporations enjoyed lower tax bills, teachers were dealing with overcrowded classrooms, globes depicting East and West Germany, and textbooks identifying Ronald Reagan as the current president. About 75,000 educators went on strike.

Arizona was not alone. Teachers in West Virginia, Oklahoma, Colorado, Kentucky and North Carolina also walked out this year. “This is an absolute movement,” Lily Eskelsen García, president of the National Education Association, proclaimed. “Talking to legislators isn't working. It's like talking to a wall. We have to get the public's attention. We have to rally. We have to be in the streets.”

The Arizona strike, in May, ended after a week of demonstrations when the GOP governor signed legislation promising a 20 percent pay increase for teachers. The hike actually amounted to just 10 percent. The bill also failed to provide more money for classrooms.

The $1.5 trillion tax-cut measure approved by Republican lawmakers and signed by Trump late last year has been a boon to banks. The Federal Deposit Insurance Corp. (FDIC) reported in late November that the nation's largest financial institutions racked up $62 billion in profits during the third quarter of 2018.

The figure was the highest in the 30-plus years that the agency has compiled records, and up 30 percent from the same period in 2017. About half of the profits were due to banks paying even less than the 21 percent tax rate imposed on other corporations. That has meant bigger checks for well-heeled bank stockholders.

Poor, working-class and middle-income Americans have not benefited nearly as much from Trump's tax bill. Those who did get breaks are scheduled to lose them within a few years, while the cuts for the rich will stay in effect.

The buying power of wages continues to decline, while corporations have made record profits and given nearly a billion dollars in bonuses to their executives. The ThinkProgress news site calculated that less than 1 percent of the tax cuts are benefiting working people.

In January, House Minority Leader Nancy Pelosi, D-Calif., declared: “In terms of the bonus that corporate America received versus the crumbs that they are giving to workers … is so pathetic. And I would hope that … they would invest in infrastructure and things. But our experience has been that they will do dividends. They will do stock buybacks and things like that.”