Delaware's School Tax System: An Inquiry and Its Answer BY CHAS. A. WAGNER, A. M., Ph. D. Commissioner of Education Authorized to be printed and distributed by the State Board of Printing and by the State Board of Education Dover, Del., December, 1916 / \A / D, of D, MAR. 28 1917 K ^ N I. DESCRIPTION OF THE SCHOOL TAX SYSTEM In three matters the local School Committee of each school dis- trict of the State is an independent sovereignty, namely, in making the School Assessment, in fixing the school tax rate, and in operating its school. The school Assessment is usually made by the Clerk of the School Committee, and is supposed to be made each year upon view of the property assessed. At the annual meeting in 'each school dis- trict the voters determine what sum of money shall be raised by taxation for the next school year; and then the school commissioners determine the tax rate. The assessor enters in the Assessment List the names of all voters and property owners of the school district, and assesses against each property owner, the 'clear rental value' of real estate, the value of his Personal Property and the value known as Capitation Tax Assessment against each voter. The law expressly requires that these Assessments of value shall be made upon view of the property, and may not be copied from the Assessment List for the Hundred (a political division of the County) within which the property is situate. This list of assessment or entry of values of property owned within the school district by the respective voters or owners, is called the School Tax Assessment List. They are not recorded except in the rare instances of a very careful School Committee or School Clerk. Often the only account of taxes levied, sums paid and of sums still owing, is kept on the Assessment List. After the district school account with the State Auditor is closed, these lists are generally laid away, lost and forgotten, and thereafter it becomes impossible to learn what amount of school taxes are levied, of the amount levied what amount was paid, who had paid and who had not paid school taxes, and who had been excused or exonerated from payment. Upon the total amount of values assessed for each of the three forms of property values specified for assessment, the School Com- mittee fixes the tax rate for the given year, after it has been decided whether only the $100.00 required by the school law to be raised locally in each district shall be raised, or whether a larger sum than $100.00 shall be raised by taxation. After the tax rate has been fixed for the year, each kind of property value must pay a school tax at the rate fixed on its assessed value, so that upon all kinds of property value the rate is uniform within that school district. In different school districts the tax rate varies just as much as the valuations vary. II. DESCRIPTION OF THE COUNTY TAX SYSTEM. At the last legislature Sussex County, by legislation, secured the establishment of a new County Tax System which is reported to be very satisfactory and yielding a much larger percentage of the taxes actually levied. In all the counties, however, there is an Assessment List. In the County Assessment List the voters and property owners are listed, and opposite each name entered on the list, is an entry of 3 the real estate and personal property owned, and of a Capitation Tax Assessment (or amount). The only difference between the County Assessment List and the School Assessment List is, that real estate is entered at 'real value' in the County Assessment instead of at its 'rental value.' This difference results in making the total of values in the School Assessment List very much smaller than are the total values for exactly the same property and persons within the identi- cal area for the Coimty Assessment List. IIL COMPARATIVE SHOWING OF ASSESSMENT FOR SCHOOL TAX AND FOR COUNTY TAX PURPOSES. COUNTY ASSESSMENT SCHOOL DISTRICT ASSESSMENT Taxa- Real Live Capita Real Live Capita bles, Estate, Stock, Assess- *■ Estate, Stock, Assess- num- (real (Pers. ment. (rental (Pers. ment. bers value) Prop.) value) Prop.) substi- ' tuted 1 $75.00 $ .25 $50.00 $200.00 2 4,000.00 550.00 55.00B 3 75.00 .25 50.00 200.00 4 4,500.00 600.00 .25 450.00 520.00 200.00 5 lOO.OOB 6 2,490.00 300.00A .25 160.00 200.00 7 IIO.OOB 8 400.00 100.00 9 4,300.00 425.00A 400.00 10 .25 450.00B 200.00 11 625.00 75.00 .25 100.00 100.00 200.00 12 3,375.00 175.00 .25 400.00 250.00 200.00 13 400.00 400.00 14 2,060.00 .25 200.00 20.00 15 2,750.00 125.00 .25 350.00 100.00 200.00 16 .25 200.00B 200.00 17 375.00 .25 500.00 200.00 18 .25 50.00B 200.00 19 7,665.00 150.00 .25 600.00 400.00 200.00 20 250.00 .25 100.00 200.00 21 375.00 .25 200.00B 300.00 200.00 22 .25 200.00 23 3,475.00 250.00 .25 350.00 400.00 200.00 24 2,000.00 150.00 .25 200.00 200.00 200.00 25 1,000.00 75.00 .25 100.00 100.00 200.00 26 3,650.00 325.00 425.00 375.00 27 60.00B 400.00B Totals $40,290.00 $4,900.00 $4.75 $4,755.00 $5,100.00 $3,800.00 Explanation : A, items included in County List but not in School District List. B, items included in School District List but not in County List. Herewith is shown the assessment of values for exactly the same persons or taxables in a school district in New Castle County, and in the County Assessment List for the Hundred within which the school district lies. The School Assessment List was secured from the School Clerk's list by Superintendent E. L. Cross, and the figures from the County Assessment List were secured by the Commissioner of Education from the Clerk of the Peace for New Castle County, and are the assessments of the same property for the same tax year. Note: — Think of the aggregate of differences if all the 400 school districts Assessment Lists could be compared with the County Assessment Lists! What an argument for a revisioq of the State's tax system ! As noted below the table, each assessor failed to find or to record some of the values found by the other assessor. The County Asses- sor found taxable value for numbers 6 and 9 not entered by the School District Assessor. The School District Assessor found values for numbers 2, 5, 7, 10, 16, 18, 21, and twice for number 27. In the case of number 19, personal property which the County Assessor enters at $150.00, the School District Assessor enters at $400.00. However, it is not an argument to show the need of revision of our entire tax system that is here sought. A careful and close study of the table will show other discrepancies just as glaring. The striking difference between the two Assessment Lists, and the difference which in practice imposes all the hardship and injustice, lies in the differences of the totals of the lists. Note this difference, if we use the Capitation Values from the School District Assessment List, as we must do to institute a comparison, since the County Assessor entered no Capita- tion Value, but a specific sum or amount of tax to be paid by each voter. COUNTY TOTAL OF ASSESS- SCHOOL TOTAL OF ASSESS- MENT LIST : MENT LIST : Real Estate, real value $40,290.00 Real Estate, rental Personal Property ... . 4,900.00 value $4,755.00 *Capitation values 3,800.00 Personal Property 5,100.00 Capitation values 3,800.00 Total Assessed Values . $48,990.00 Total Assessed Values . $13,655.00 (*From School Assessment List). The County taxed for its purposes, $48,990.00, and the School District for its purposes, for the same persons and the same property within the same area, taxed $13,655.00. The School District used this total of $13,655.00 to make up the required school tax this year, which tax was $154.00 actually collected. The School tax rate thus became $1.33 on each $100.00 of assessed value. Had the total value of the County Assessment list been the basis for determining the tax rate, a rate of $0.32 on the $100.00 would have produced the necessary $154.00 of tax money for the schools. The difference in favor of thq tax payer when the tax rate is $0.32 on the $100.00 of valuation, as compared with a tax rate of $1.33 on the $100.00 of valuation, is certainly clear to any tax payer. Now it is just this difference in tax rate which follows necessarily from differences in total assessment, that works the hardship on the owners of the different kinds of property. The assessment of Personal Property is about the same for the same property in each Assessment list. That is, the total value of the assessed Personal Property is almost the same in the two lists. Consequentl)', a low tax rate is to the advantage of the Capitation assessment and of the Personal Property assessment, and a high tax rate is to the disadvantage of both these forms of values. That is, by assessing real estate at its rental value, the total School Tax Assessment is small (only $13,655.00), therefore the tax rate must be very high, therefore the tax on Personal Property and on Capitation Assessment must be very high. Therefore, under the present school tax system, the owners of Personal Property and taxables who pay only Capitation tax, PAY GROSSLY OUT OF PROPORTION TO THEIR JUST DUES UNDER AN EQUIT- ABLE TAX SYSTEM. This is the fact and condition which causes all the complaint about taxes and hardship of high taxes under the present system. If the County total of assessments had been used to levy school taxes, and if the school tax rate had been $0.32 on the $100.00 of value, the school tax for the owners of Personal Property and the taxables who pay only Capitation tax, would have been very light, because the rate is low. In fact, the Personal Property owners and the Capitation tax payers would have had to pay only one-fourth as much tax on these values. The other part of the tax would fall upon the owners of real estate in proportion to the. increase in the assessment of value of their real estate. The tax rate would still have been the same for each kind of value, but since the increase in the assessment was all due to increase of assessed value of real estate, that kind of value alone would have found itself paying increased school taxes. IV. UNFAIRNESS OF THE PRESENT SCHOOL TAX SYSTEM The simple and single purpose of this presentation is to secure in the school tax system that standard of fairness and equality which tax payers now have in the County tax system. That being the sole aim, charges of novelty and of revolutionary changes cannot be maintained against the proposal of change. In the county the assessment of real value of Real Estate has worked. In the city of Wilmington and in the towns of Lewes, Rehoboth Beach, Laurel and Seaford, Real Estate is taxed at its real value for school taxes. Therefore, the idea is not new, therefore the plan is not revolutionary. The State legislature some years ago, when authorizing several school districts to raise money for the erection of new school houses, passed special acts authorizing these districts to assess real estate at its real value in these districts when raising the tax for building purposes. Here we have^a number of progressive communities, and the State legislature acknowl- edging and employing the principle, hence it must be sound and equit- able. In "An Act to authorize the School Committee of School District No. 130, in Kent County, to raise money for the purpose of building a new School House, "Chapter 83, of Vol. 18, page 138, Laws of Delaware, the following passage is found in Section 1, beginning in line 10: " Provided, and it is hereby made the duty of the said School Committee of said School District, in assessing the tax by this act authorized, so far as the same shall be assessed upon r'eal estate, to assess such real estate at its assessed value upon the general assessment of Duck Creek Hundred instead of upon the clear rental value as required by law." In Chapter 66, page 117, Vol. 18, Laws of Dela- ware, a similar provision is found. In Chapter 89, page 142, of the same volume, assessment of real estate for school tax purposes is, "according to a certain rate in and upon every hundred dollars of the estimated value of the property assessed." In Chapter 540, page 651, Vol. 18, Laws of Delaware, the same provision is found. V. POSSIBLE EXPLANATION OF THE PRESENT SYSTEM'S FAILURE TO MEET THE REQUIREMENTS OF FAIRNESS AND EQUITY. The present school tax system is old. It was established in times and under circumstances very different from the present. Different ideas of rights of persons under the established order prevailed. Though established long ago, it has not been modified or changed since its establishment. Necessarily and inevitably, therefore, it is out of tune and harmony with present ideas of rights of property, of citizens, and of equality before the law. Delaware was then a purely agricultural State consisting almost entirely of landed estates, and of tenants or renters. To the land-owning class of that day it seemed unfair that for these free schools, which were ordered to be established by law in 1829, they should be charged, or that they should pay taxes toward the support of these 'free schools,' since the children of the land-owners, a different class of society, were not going to attend these 'free public schools' (charity schools they were often called). The children of the land-owning class had always been sent to private schools, at the expense of the parents, so long as class distinctions in society were maintained. Therefore, it was an act of benevolence and of generosity for these land-owners to agree to the payment of any tax for the support of these ' free' or stigmatized schools, even if that tax were so little as a tax on the rental value of their farms. The present school tax system' was thus planned for a state of society which recognized social classes, and although the law merely makes the distinctions of kinds of property values, it was well known that property does not pay tax. Property owners must pay the taxes. Hence to tax different kinds of property on different ratios of values was a cunningly contrived avoidance of the principle funda- mental to the claims of our government, that there shall be special privileges to none and equality and fairness to all. VI. THE PROPOSED CHANGE. Merely for the sake of definiteness and of easy discovery if a definite statement of the proposal should be sought, it seems wise and desirable to include a simple and complete statement of just what the proposed change is. Many consequent changes will follow a change in the school tax system, but those consequent changes are not a necessary part of this presentation. It is proposed, THAT THE ASSESSMENTS OF PROPERTY FOR SCHOOL TAX PURPOSES BE UPON THE REAL VALUE OF ALL PROPERTY IN THE SCHOOL DISTRICTS. VII. EFFECTS OF THE PROPOSED CHANGE ON THE DIF- FERENT CLASSES OF PROPERTY, AND THEREFORE EFFECT UPON THE TAX PAYERS. Interested readers of this discussion will have asked themselves before this point has been reached, "How will the change affect the school taxes upon the several kinds of property values assessed?" An answer to this question is therefore due. To make sure of clear perception and distinction, it must con- tinually be borne in mind that no property pays taxes, but that only property owners pay taxes, and that a classification of property at different values for taxing purposes is in effect making a classification of property owners' for tax paying purposes. Also, it must not be forgotten that any one taxable may be paying taxes on one or two or on three of the kinds of values assessed for tax purposes. If this fact be carefully remembered, it will be easy to understand that the effect upon any one tax payer of any particular method of taxation, will depend on the kind or kinds of property values for which he is assessed, and also upon whether the full value or a part of the value of any form of property be assessed. A few concrete examples of how tax-payers will be affected by the change will make the results enlightening: EACH EXAMPLE IS SHOWN AS IF THE SCHOOL DISTRICT WERE RAISING THE SAME GROSS OR TOTAL AMOUNT OF SCHOOL TAX AS NOW. Person No. 22 in the specimen Assessment Lists will serve as an example of a tax-payer who pays on Capitation value only : Example I. As things are: Capitation Assessment, $200.00. School tax, at the $1.33 rate on $100.00. 2.00 x $L33 equals $2.66. As things would be: Capitation Assessment, $200.00. School tax, at the $0.32 rate on the $100.00: 2.00 X $0.32 equals $0.64. Change: $2.66 minus $0.64 equals $2.02, decrease. Example II, Person No. 16 is a person paying taxes on both I^'ersonal Property and on Capitation Assessment. As things are: Capitation Assessment, $200.00. Personal Property, $200.00. Total, $400.00 School tax, at the $1.33 rate on $100.00: 4.00 X $1.33 equals $5.32. As things would be: Capitation Assessment, $200.00. Personal Property Assessment, $200.00. Total, $400.00. School tax, at rate of $0.32 on the $100.00: 4.00 X $0.32 equals $1.28, Change: $5.32 minus $1.28 equals $4.04, decrease. Example III: No. 4 will serve as an example of a person paying taxes on all three forms of property. As things are: Real Estate Assessment (rental value) $450.00 Personal Property 520.00 Capitation Value 200.00 Total $1,170.00 School tax, at the rate of $1.33 on the $100.00. 11.70 X $1.33 equals $15.56. As things would be: Real Estate (real value) $4,500.00 Personal Property 520.00 Capitation Value 200.00 Total $5,220.00 School tax, at the $.032 rate on $100.00: 52.20 x $0.32 equals $16.70. Change: $16.20 minus $15.56 equals $1.14, increase. 9 Example IV: No. 26 is a person who pays taxes on Real Estate and on Personal Property. As things are: Real Estate Assessment, (rental value) $425.00 Personal Property 375.00 Total $ 800.00 School tax, at the rate of $1.33 on the $100.00: 8.00 X $1.33 equals $10.64. As things would be: Real Estate, (real value) $3,650.00 Personal Property 375.00 $4,025.00 School tax, at the $0.32 rate on $100.00: 40.25 X $0.32 equals $12.88; Change: $12.88 minus $10.64 equals $2.24, increase. Example V : No. 9 is an example of a person who pays school taxes on Real Estate only. As things are: Real Estate Assessment (rental value) $400.00 School tax, at the rate of $1.33 on the $100.00: 4.00 x $1.33 equals $5.28. As things would he: Real Estate Assessment (real value) $4,300.00 School tax, at the rate of $0.33 on the $100.00: 43.00 x $0.32 equals $13.76; Change: $13.76 minus $5.28 equals $8.48, increase. It is to be noted that while three of the examples given show an increase of tax sums or amounts paid, it must be borne in mind that the district shown has an unusually large proportion of its tax- ables who are owners of real estate. If the State as a whole be con- sidered, there will be many persons who pay taxes only on Personal Property and on Capitation values (Examples No. 1 and No. 2). The big decrease will come to these two classes of property owners. The big increase will come to the 'persons who pay taxes on Real Estate only (example of No. 5). To the owners of Real Estate and one or more of the other values, the difference will not always be an increase, but may be a decrease, and will always be small either way; (examples No. Ill and No. IV). 10 If we think of NUMBERS, therefore, the change will be of advan- tage to very many persons, and a disadvantage to a very few, and to the very few it will cause no loss of actual necessities of life like bread, clothing or shelter. Of the present system that is certainly not true, for pitiful and depressing are the tales abroad of how the high taxes on horses and mules have required sacrifice and denial of actual necessi- ties to wives and children, not to mention the sacrifices of a chance to get an education suffered by some children. If it be true that school taxes on Personal Property and Capitation assessments will be less after the change, will not landlords therefore increase their rents, especially since the change has increased their taxes? This will become a very important phase of the discussion if it chances that the proposal makes any appeal to the citizenship of the State so that a wide-spread demand for the change becomes mani- fest. A year ago, during an effort to secure a favorable votle on some consolidation projects, threats of some landlords, made to tenants who had promised to vote for consolidation, turned the promised support into opposition of consolidation before the day of election. This experience clearly shows what tactics to expect. Some land- lords will help to bring the change about, and others will threaten their tenants with increase of rent to correspond with the landlords' increase of taxes. A word to these landlords may cause them to ponder the situation quite carefully. There is abroad the knowledge that good tenants are scarce. That labor on the farms is scarce. It is possible that the fact that tenants and laborers have been imposed upon in the school tax system, is one of the reasons why tenants will not stay on the farms and why laborers leave the farming com- munity. It is certain that to increase the burdens of tenants and laborers, is to still further increase the difficulty of keeping labor on and around the farms. For the tenants it is iniportant to know that increasing the tax on land values cannot increase rents. First, the tax increase will be State wide, so that all the land-owners of the State will be in search of tenants, and more earnestly in search for them than ever before. An idle, unproductive farm yields no income with which to pay tax, therefore farm-owners will be hunting up good tenants, and in order to get them will soon realize the necessity of offering better terms and lower rents rather than harder terms and higher rents. No truth of poHtical economy is more certain than that when supply is abundant the price falls. That is just as sure as that an apple falls to the ground when it breaks free from the tree. Similarly with rents, when farmers are hunting tenants, they will offer induce- ments to get them. HENCE, THE TENANT CLASS NEED NOT BECOME FRIGHTENED BY THREATS AND PREDICTIONS THAT WILL SURELY BE MADE. SUCH THREATS CANNOT BE CARRIED OUT. 11 VIII. POSSIBILITIES FOR THE SCHOOLS IF THE CHANGE BE MADE. It would be a serious fault in this presentation, however, if it urged the change of tax system only because of its greater fairness and equity, and because it will reduce the tax payments of some persons. Since a very large increase in the assessed values would result from including Real Estate values at their real value, and since large reductions in the taxes on Personal Property and Capitation values would be sure to follow, therefore it would be wise, desirable, and entirely feasible to appeal for an increase in the revenues for schools, so as to make some sadly needed betterments. If vv^e take the case of tax payers in the district represented in the assessment tables included in this discussion, it will be recalled that the tax rate could have been reduced from $1.33 on the $100.00 of valuation to $0.32 on the $100.00 of valuation and yet raised the same amount of school tax. Any district that has been accustomed to a fairly high tax rate would feel ashamed to fix a rate as low as $0.32 on the $100.00. A reduction of three-fourths in the tax rate is not desired and would not be insisted upon Hence, it would be better to make the reduction in the tax rate only one-half instead of three-fourths. If we take the district used as an example, the new assessment of $48,990.00 at a rate of $0,665 on the $100.00 of value (which is one-half of the present tax rate) would yield, $325.78 instead of $154.00 as now, and yet all Personal Property and Capitation assessments would pay only half as much school tax as before. Think of what such a difference of revenue might be made to mean to the schools: better wages for teachers, thence better teachers; more equipment of all kinds, new maps, sufficient black-boards, school libraries and reference books, periodical literature for a reading table, instruction by moving pictures, etc. Therefore, the change can be made, the schools can be much bettered in every way at the same time that the taxes of many tax payers are diminished, and this without the loss of any necessities by the class of tax payers who would have to pay increased school taxes. IX. HOW THE CHANGE MAY BE EFFECTED. Any and every good citizen must favor the change, regardless of the effect it might have on his account personally. If all good citizens will unite their efforts in creating the necessary public sentiment and necessary desire for the change, it will come. Aggressive citizens should labor to secure the adoption of resolutions, the promotion of debates and discussions of the matter, the writing of personal letters to the newspapers and to the men in the legislature, and should secure the sending of delegations to the Committees of the legislature, asking for this legislation. The change must be made by the legislature. The leaders in the legislature will sanction the change and secure its 12 enactment into law after a bill has been drawn and presented, if the people want it and say so in unmistakable language. Heretofore the bills proposing the change have been defeated by the activity of the special class who get the benefit of the system as things are. Such defeat has been possible and is again possible, if the people do nothing and say nothing. It Avill be utterly impossible to defeat such legis- lation if the people say they want it. Therefore, the awakening of the people and citizens to what is involved in the issue, an awakening of a sense of justice and of their hopes and aspirations 'and desires for their children and for their State, offers the only hope of success, the only promise that this beginning of school betterment may be speedily inaugurated. The question raised is distinctly a question of equity and justice in the tax laws. This makes it a MORAL question, a question of fair treatment and of justice, of treatment according to the principle of securing the greatest good for the greatest number. Therefore, partisan political consideration cannot make it pri- marily a question of party. Citizens of every community, adherents of every party, are interested, but their interest is personal and social and not partisan. Every party that hopes for the suffrage of men who love justice and who will support measures of justice, will be ready to hold this an ethical question rather than a partisan question. Neither is it a race question. The schools of both races are operated under the same tax laws. Hence, considerations of race cannot divide people into supporters and opponents of the proposed change. The question of rural and urban sectional division cannot enter, for the system as it is applies to towns and to farms. Nor should the issue be permitted to become an issue of social rank or classes. As has been already pointed out, when instituted, the system was undoubtedly intended to favor a particular class of property owners, but the recognition of such distinctions in democratic society is now obsolete hence this attempt to reform the school tax system is an effort to remove and to wipe out the remains of a system founded upon such recognition. To cure a disease, the doctor must diagnose it, must find out what it is. That necessity rests upon any effort to make Delaware's school tax system conform with present day economic and governmental ethics. Were this necessity disregarded and were the fact of class distinctions in the present system smoothed over, no clear reason for what exists and no good reason for the change could have been made to appear. Hence, the issue is neither political, nor partisan, nor racial, nor based upon distinctions of social strata or classes. It is therefore indisputably a MORAL QUESTION, whether or not the State's school tax system shall be changed so as to embody present day ideas of fairness, of equality, or of regard for the 'common good.' As such a question, press, pulpit, granges. Century Clubs, Parent-Teacher Associations, Debating Societies, Institutes and every other forum for the enlightenment of the public and for the 13 creation of sentiment, should feel its obligation to help with the dis- cussion, with the expression and formulation of united and combined sentiment, and with the presentation of such resolution and senti- ment, to the columns of the newspapers, to legislators, to governing officials, to the Governor of the State. Citizens niay be inactive and may remain inactive, but if they are inactive, it is because they are shirking. No citizen of Delaware to-day has any moral right to accept the advantages secured for him by the generations gone before, and assume an attitude of indifference to the future. To accept and to enjoy what the past bestowed, imposes the binding obligation to behave toward the future as the past has behaved toward you: give the future something better than you got. 14 CHAS I.. STOKY, PRINT. WILMINGTON, DEL. I917 LIBRftRY OF CONGRESS 021 496 758 3