The case for property tax elimination
Since I was elected to the Pennsylvania Senate in 2019, I’ve heard from constituents on issues that span the spectrum of all areas of the state government. Their feelings on one particular issue have been very clear: The school property tax is the most hated tax in Pennsylvania (with the gas tax being a close second).
The property tax is like paying rent to the government for the land you own. It’s easy to see why this antiquated tax is so despised in all corners of the Commonwealth. More than 10,000 homes are seized annually in Pennsylvania and auctioned off for failure to pay the tax. It is particularly troubling that most of the home seizures are from our elderly. Many of our retirees on fixed income are faced with the stark choice of paying for food, medicine, or paying the tax. This is simply unacceptable.
When presented via ballot referendum question in 2017, the people made their voice loud and clear. By a vote of 54% to 46%, voters statewide supported amending the Constitution to allow for the full elimination of property taxes for homeowners.
A property tax of a few thousand dollars in addition to a monthly mortgage payment hurts individuals looking to maintain a home especially when they are on a fixed income or living paycheck to paycheck. Homeownership in Pennsylvania has dropped from a high of 75% in 1999 to 70% in 2020.
The common defense of those wanting to keep the property tax in place is that our state “can’t afford it” without drastically affecting the quality of education.
I counter that we can make property tax elimination a reality with a little “outside the box” thinking.
For starters, we need to reimagine how we fund education. By redirecting our state funds to follow students instead of systems, not only will we expand choice on where parents can send their children to school, but we will also save money.
Establishing programs like Education Opportunity Accounts (EOAs) would provide families with direct access to educational resources. Individual school districts would no longer receive the average per-pupil state education subsidy for the children who participate in the EOA program. Instead, the funds would be redirected to the child’s education opportunity account administered by the state treasurer and regularly audited by the state. With better accountability and increased competition for students amongst schools, Pennsylvania can actually save money on expenditures for education while improving its quality.
We can also explore revenue alternatives that don’t hurt the wallets of everyday Pennsylvanians.
Several of our private state universities are sitting on billions in untaxed endowment funds. University endowments are comprised of money or other financial assets that are donated to academic institutions. The largest in our state, Penn, has an endowment of over $20 billion after a 41% return from investments in 2021.
Taxing endowments on wealthy private colleges in Pennsylvania would be significant annual revenue generator for the General Assembly’s general fund.
Another untapped source for revenue is a fee on international remittances conducted by a money transfer licensee or agent. An international remittance is a sum of money that is electronically sent out of the Pennsylvania economy and into the economies of international destinations. Considering Pennsylvania’s estimated foreign workforce, even a modest fee would generate significant annual revenue for the state.
We also must look at getting our current spending under control. I believe that a thorough review of all 33 state government agencies will reveal significant waste and redundancy. Trimming the fat off these agencies will pay dividends for Pennsylvania in the long run, reduce the cost of our state government, and slash burdensome regulations. Better stewardship of the already exorbitant spending by Harrisburg is key to how we can afford property tax elimination.
The modern model of property taxation has roots in the 14th and 15th centuries when feudal obligations were owed to British kings or landlords. British tax assessors used ownership or occupancy of property to estimate a taxpayer’s ability to pay.
In the spirit of our founding fathers who rejected ancient European laws and customs, we can once again embrace our role as a beacon for freedom by eliminating all property taxes on homeowners in our Commonwealth.