Gov. Maura Healey (D) made Massachusetts the eighth state to adopt a universal income-agnostic free lunch program for school children when she signed the state budget for 2024 last month. Notwithstanding the fungibility of revenue, the program will be nominally paid for by a 4% tax on high earners, also known as the millionaires tax. The tax targets state residents with an annual income over $1 million and is expected to raise $1 billion annually.
States have been adopting their own free breakfast and lunch programs since the comparable federal program, adopted during the Covid-19 pandemic, expired at the beginning of the 2022 school year. Such programs that don’t incur debt and are income-agnostic are preferable to students going hungry but otherwise are bad tax policy.
Where the Millionaires Tax Comes In
Massachusetts had a projected $5 billion surplus for fiscal year 2022, when it first looked at the student lunch program problem. While revenue dropped about 5% in fiscal year 2023, the state nonetheless has enjoyed record-setting revenue numbers in the previous few years.
Massachusetts didn’t need to pass a 4% tax on millionaires to provide students with free school lunches—the state merely did so because in a battle between the concerns of hungry school kids and millionaires, the former will have an edge.
That isn’t to say the millionaires tax doesn’t have problems, including the risk of capital flight and the ever-present possibility of tax avoidance. But it’s not bad policy from the ground up. The general idea is solid and can help further income equality.
However, its prospects are uncertain. We instead should be insulating the young from precariousness rather than linking their provision of nutrition to the ongoing political salience of “tax the rich” in a country where that concept falls in and out of favor on a regular basis.
Furthermore, revenue in Massachusetts has dropped from its pandemic-era highs, falling nearly $2.2 billion between 2022 and 2023. Linking in the public mind the provision of free student lunches to the increase in revenue from the millionaires tax, in the context of declining revenue, sets up the student lunch program to be cut as a nice-to-have rather than essential service.
The specific example in Massachusetts provides a more general lesson for what can be expected from the states on this front—lunch programs will be enacted in states where they are politically viable and can be attached to a revenue-raising mechanism that is politically salable.
The more states that pass “tax the rich” provisions to pay for student lunches, the closer the connection will be made between providing lunches and wealth redistribution. This will politicize an issue that, as of 2021, saw 74% of likely voters supporting universal free school lunches. Ultimately, the students will lose.
States as Laboratories of Policy
The argument that it’s better to experiment with tax policies at the state rather than federal level because states can act as policy laboratories has some credence—there’s the potential to test run dozens of different solutions to a given policy problem. However, when the policy problem is the feeding of students and the prevention of their accruing lunch debt and being denied meals, the risks outweigh the benefits.
There’s a vast delta between the state spending the most on education per pupil and the least. For 2021, the latest year for which data is available, New York spent $26,571 per pupil. Idaho spent just slightly more than one-third of that, at $9,053.
Although there are cost of living differences between those two states, there also appear to be clear differences between the states regarding their ability or willingness to spend on education.
This spending disparity suggests that leaving student lunch programs to the states will place the provision of nutrition for school children at the whims of 51 distinct political and economic machinations. During the pandemic, even with the federal funded program, states saw schools opting out of the program en masse because of the added initial cost and administrative burden of providing lunches to all students, rather than just those who had previously qualified for the program.
Since then, states taking a targeted approach and those attempting to fill the void left by the universal program have split—even with states that have passed revised student lunch programs.
A Policy That Worked
To find a student lunch policy that works, we can look back to our own national policy from just a couple of years ago. Much like the now-expired expanded child tax credit, the federal free student lunch program in place during the pandemic just plain worked. Once it was allowed to expire, stringent income requirements and administrative overhead for parents returned.
To qualify for free meals, a household of three must have an income of less than $32,218. A single parent household must make less than $25,636, or $2,137 per month. Additionally, they’ll need to file forms they may not be aware of to qualify for a program they may not know about while living on the functional equivalent of $12 per hour or less—a tall order.
Thirty million students in the US can’t afford school meals, and more than two-thirds of schools had accrued student meal debt.
It’s a national problem, and the solution must come at the national level. While programs such as the one in Massachusetts are short-term wins, the risk of politicizing the issue outweighs the benefits.
Look for Leahey’s column on Bloomberg Tax, and follow him on Mastodon at @andrew@esq.social.
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