Property tax ‘reform’ bill falls short
The property tax reform legislation proposed in the state Senate is the supposed answer to more than three decades of debate and wishful thinking among many in Pennsylvania.
But if the measure proposed by Schuylkill County Republican state Sen. David Argall passes, local taxpayers may find themselves in worse shape than before.
The bill would not eliminate the property tax in every school district, and the added tax burden in income and sales tax shared by all would send more tax dollars to richer districts than poor ones.
In districts that currently have existing debt, which includes many in the growing suburbs of southeastern Pennsylvania, where school construction has been a necessity, school property taxes would not be eliminated. Under Argall’s bill, as much property tax as is necessary to pay down existing debts would remain until it was all paid.
As one district business manager explained recently, the annual debt payments for projects of the past few years add up to about $5 million, or 8 percent of the proposed $66.4 million budget for 2017-2018. That means about 15 to 20 percent of the current school property tax levy would remain for the property owners in that district.
Another issue is that the bill eliminates property taxes for businesses and industries as well as homeowners. The millions of dollars that come into local school district coffers from a large pharmaceutical company or a major manufacturer will go away. Instead, those dollars will come out of the pockets of working taxpayers and consumers in the form of increased income tax and higher sales taxes.
To make up for what the Associated Press calls a $14 billion tax shift from property owners and businesses to Pennsylvania consumers and workers, the state’s personal income tax rate would be hiked from 3.07 percent — one of the lowest in the nation — to 4.95 percent.
Additionally, the state’s sales tax would be increased from 6 to 7 percent and more things, including food, clothing and funeral services, would be subject to the tax.
Perhaps most troubling is that the proposal exacerbates rather than corrects the disparities in funding from rich to poor districts.
Chester County resident and Public Interest Center lawyer Michael Churchill explained it this way in a letter to Digital First Media:
“The new state funding will go to replace on a dollar-for-dollar basis all current local property taxes. This will shift the cost from taxpayers in wealthy districts to taxpayers in poorer districts — the exact opposite of what our school children need and the opposite of tax fairness.
“This is because the local tax base varies so greatly that Lower Merion can raise $23,000 per student locally with a tax rate less than twothirds that of Pottstown, which raises only $8,500 per student.
Under the proposed bill, Pottstown taxpayers’ income and sales taxes will help repay all of the Lower Merion $23,000. Lower Merion will continue to have great excessively-funded schools, Pottstown will continue to have underfunded schools, but now Pottstown taxpayers will also be paying the bill for Lower Merion’s schools. This is reform?”
Those who have analyzed Argall’s proposal including the Public Interest Law Center and The Associated Press see little relief for local districts. The residents who see their property tax bills reduced will see other taxes going up to generate money that may or may not be adequate to fund the schools where they live.
We have advocated for property tax reform many times in this editorial space. But the current bill (assuming Sen. Argall doesn’t make major revisions from the one he proposed in the last session) is not reform: It’s a measure to reject and replace without consideration of a level playing field.
Taking the tax away from one pocket to put it in another with more burden on the poor and more benefit to the wealthy is not what Pennsylvanians need or want.
The Senate property tax elimination proposal has a lesson: Be careful what you wish for. The results may come back to haunt you.