Although a bill aimed at relieving homeowners’ tax burdens was halted without receiving a full hearing in the latest legislative session, support for property tax reform in Pennsylvania has grown since the November elections. Several new incoming state representatives campaigned on supporting comprehensive reforms of the state’s tax structure, nicknamed the “the Property Tax Independence Act (PTIA),” suggesting a future attempt at the bill may be more successful.
PTIA was approved by the respective originating House of Representatives and Senate committees, but it stalled under consideration by other committees. The bill will have to be reintroduced next year, as the state’s legislative session has ended.
“There are other areas around the state that have a big property tax problem,” the bill’s primary sponsor, Rep. James Cox (R-Berks County), said. “As I talk to other members in the House, they’re saying the same things that we see in Berks County. People like to talk about Berks County as being ‘the epicenter of the property tax issue.’ I don’t know if that is necessarily accurate, but some of the more vocal members of the House have come from Berks County, so that may be where that came from.”
“‘Where it comes from’ is an ancient formula—and I say ancient, it’s from the 1990s—that funds our schools, and there’s this little provision in there, a ‘hold-harmless’ provision,” Cox explained. “If you had 1,000 students in 1991—when the formula was put into place—you got a set amount of money for those students. Let’s say they’d be getting $100,000 under our state budget for those 1,000 kids.”
As the state’s population shifted from west to east, however, the formula remained unchanged. Overcrowded eastern schools were forced to make do with inadequate state funding, while western schools continued to receive the same amount of money.
“We in the eastern part of the state are educating more students but not getting the proportional share of funding that we should get from the state, because those counties with dwindling populations simply don’t need the money, but they get it, because of that hold-harmless provision,” Cox explained. “We aren’t getting what we need from the state, so we had to raise it in local property taxes.”
Speaking of PTIA, Cox—who initially drafted the bill in 2003, as a legislative staffer— called the bill “a huge shift—a huge shift—off of their backs.”
“It generates the same amount of money in sales and income tax that the local property tax generates, statewide,” he added. “When you’re looking at replacing $10 billion in property tax, you find that the only place you can get that are very broad taxes like the sales and income taxes.”
If passed by both chambers of the legislature and signed into law next year, the act would gradually decrease property taxes and shift the burden to sales and income taxes. Estimates by supporters of the act say the sales tax would increase by 1 percent and the personal income tax would increase by 1.27 percent.
Better Luck Next Year
“The bill would raise state taxes on personal income and sales to eliminate property taxes levied by the state’s 500 school districts,” said Eric Montarti, a senior policy analyst at the Allegheny Institute. “The proposal would apply to school property taxes only—it would not affect municipal or county property taxes—and would apply to all types of property, … residential, commercial, industrial, and so on.”
Optimistic about the bill’s chances next year, Cox noted his proposal progressed farther than in past attempts.
“We’ve reached the highest number of cosponsors, we got a high level of traction on it, but we just could not get our caucus leaders to get behind it,” he said.
“This is the opportunity for people to finally have home ownership—the opportunity for people to control their level of involvement in how much taxes they pay.” Cox added “People can finally own their homes; they don’t have to worry about paying rent to a school district—to the tune of five, six, eight, ten thousand dollars a year. That kind of money in people’s pockets would be huge.”
Dotty Young ([email protected]) writes from Ashland, Ohio.