Personal income as an ability measure and/or funding source for local school corporations in Indiana

The purpose of this study was to provide information on local personal income taxation as an alternative to property taxation for school corporations. The intent was to determine if local income taxation would provide an equitable and adequate source of revenue that would increase local funding and perceived local control of schools.;Three preliminary tasks were undertaken in beginning the study. First, all states which currently use income in their school funding program were reviewed to determine characteristics, as well as changes, that have occured since 1978-79. Second, a survey of Indiana legislators, education and taxation lobbyists, and state officials concerned with education and taxation was undertaken to determine their attitudes toward income as an ability measure and/or funding source for public education. Responses were categorized and analyzed by frequency and percentage within the responding group, and a T-test was used to compare significant differences among groups. Third, 1983 and 1985 personal income and total assessed valuation data for each Indiana school corporation was compared to state averages to determine each school district's relative funding ability. These data were analyzed by range, and correlations were calculated among data groups using the Pearson method. A hypothetical funding formula for Indiana was then devised using income as an equalization factor and income taxation as a funding source.;The characteristics of the states using income as a funding source and/or ability measure are varied. There is no apparent consensus among Indiana legislators, lobbyists and state officials regarding the use of income as a funding source for schools. However, there does appear to be increased interest both within and outside of Indiana in using income in some manner. The use of income as an ability measure and/or funding source serves to equalize both taxation and per pupil dollars among Indiana school districts while reducing property taxes and/or increasing revenue for schools.