A Case against More California Taxes

Despite the grim economy, Gov. Jerry Brown is asking Californians to approve a $7 billion tax hike. Without it, he recently wrote, the state “will have no choice but to make deeper and more damaging cuts to schools.” Taxpayers are thus left to weigh the potential benefits of spending an extra $7 billion, largely on public schools, against the damage that higher taxes do to employment and economic growth. When they do so, they will be surprised to learn how little they have gotten for previous increases in public school spending.

One way to estimate the academic impact of higher public school spending is to see what it has accomplished in the past. That’s the purpose of the accompanying chart, which shows the percent change in K-12 spending per pupil since 1968 and in SAT scores since 1972 (each of those being the earliest year for which data could be obtained at the time of this writing). Spending is up by 95 percent in real, inflation-adjusted dollars while SAT scores have fallen by 4 percent (accounting for the rescaling of the test in 1996).


Here’s another way to look at it: Californians spent $27 billion more on public schooling in 2010 than they did when Jerry Brown was elected to his first term as governor in 1974. That’s after taking both inflation and rising enrollment into account. Given that a $27 billion increase was accompanied by worse academic performance, the merits of a multibillion-dollar increase are, at best, questionable.

Can Californians afford to tax $7 billion out of the productive sector of the economy and get nothing in return for the damage it would do?”

But is the SAT a good way to measure the school system’s academic performance? One criticism is that these scores may fluctuate based on the share of students taking the test. The theory is that a higher participation rate can drag down the average, given the inclusion of more low-achieving students. If that’s true, then the SAT-score decline in California may be larger than it at first seems, because the participation rate was actually 4 percentage points higher in the mid-1970s than in 2010.

The increasing participation of lower-scoring minority students is also frequently offered to dismiss the decline in SAT scores during the 1960s and 1970s, but this argument, too, is unpersuasive. Nationwide, the scores of white students alone also declined, and there is little reason to imagine California was an exception to the national pattern.

One valid critique of the SAT is that only a third of high school seniors take the test, and so it is not representative of the entire student population. While that’s true, those SAT takers represent the students most likely to go on to higher education and to become leaders of industry. When a massive increase in spending is accompanied by a fall in the performance of these students, it is a grim sign for the school system and for the state’s future.

Finally, it is true that a $7 billion tax increase would at least preserve a certain number of public sector jobs, even if those jobs have not, and likely will not, improve educational outcomes. But if that $7 billion is not taxed out of the free-enterprise sector of California’s economy, it will preserve or create private-sector jobs when it is spent or invested. And, contrary to the pattern shown in the accompanying chart, jobs in the free-enterprise sector do produce things that people value: from movies and music to citrus fruits and cellphones — thus generating new revenue. Tax away that money and you take away those private-sector jobs and revenue.

The final question boils down to this: Can Californians afford to tax $7 billion out of the productive sector of the economy and get nothing in return for the damage it would do?

Andrew J. Coulson directs the Cato Institute’s Center for Educational Freedom.