Philadelphia Mayor Proposes Property Tax Hike to Fund Schools

Published March 23, 2015

To help close a $80 million funding deficit in the School District of Philadelphia’s budget , Mayor Michael Nutter (D) is proposing a 9.3 percent property tax hike on city homeowners. If enacted, taxes on homeowners would increase from 1.340 percent of a home’s assessed value to 1.465 percent.

Pennsylvania Coalition of Taxpayers spokesman David Baldinger says Philadelphia schools are allocating resources inefficiently, driving taxpayer costs up.

“The problem is gross inefficiency in the way the school district operates, coupled with other factors like employee benefits,” Baldinger said.

“For example, Philadelphia is one of only three Pennsylvania school districts, from a total of 500, that fully funds employee health insurance with no co-pays on the premiums,” he said. “A reasonable employee contribution would go far toward reducing the budget, but the unions adamantly refuse to consider such a proposal.”

An Outdated Tax

Baldinger says the property tax is an obsolete way of funding government services.

“The property tax is an antiquated model of taxation that probably made sense in the Nineteenth Century, at a time when we were a primarily agrarian society and earned our living from the land,” he said. “There was no income reporting, so the size of a person’s land holdings was likely an accurate proxy for determining wealth.

“Today, that paradigm no longer applies. Our properties are places of residence and, for the most part, are not a source of income, yet we persist in using a taxation methodology that still makes that assumption,” Baldinger said.

Baldinger says taxes should be broader and less regressive.

“A fairer and more effective financing model would be one that expands the base to include as many taxpayers as possible while still retaining the precept of the tax reflecting the person’s ability to pay.

“A better solution would be an expansion of the taxpayer base coupled with effective cost controls and the removal of the unlimited ability of any five school board members with agendas to raise taxes at will.”

Taxes Outpacing Wage Growth

Commonwealth Foundation Vice President of Policy Analysis Nathan Benefield says higher taxes on Philadelphia homeowners will not solve the problem.

“Philadelphia is already among the highest taxed cities in the country,” he said. “Raising taxes again will only drive residents and businesses out, perpetuating this cycle.”

“The annual increase in Pennsylvania school property taxes has, for the past two decades, far exceeded the rate of inflation and the increase in the Pennsylvania average weekly wage, a direct reflection of a person’s ability to pay,” Benefield said.

Tightening the Belt First

Benefield says Philadelphia elected officials and school officials should look at cost-cutting measures before considering tax hikes.

“The prevailing wage mandate forces districts to pay more on construction and building repair projects than they otherwise would, taking money out of the classroom,” he said. “Philadelphia, especially, has been hit by union contracts that require unaffordable benefits, including payments to the Philadelphia Federation of Teachers (PFT) Health and Welfare Fund, a union administered organization which provides supplemental benefits.

“The school district estimates savings of $22.4 million just from moving away from the PFT Health and Welfare Fund to a private provider,” Benefield said.

Rudy Takala ([email protected]) writes from Washington, DC.