Property taxes are not the problem — spending is

Published August 16, 2012

It is no surprise Pennsylvanians are revolting against property taxes. Their anger at state and local governments for sucking their hearths away is largely justified.

But the answer is not to eliminate property taxes and replace the revenue through sales and income taxes. There is plenty of room for budget cuts.
The problem isn’t in how the state government gets its money, but that it demands so much. This isn’t just bad policy, it’s immoral: States should take only as much in taxes as they need to function effectively, because every tax dollar is taken from someone who worked hard to earn it. Government spending produces fewer economic benefits than private spending because every extra tax dollar limits the productive economy and prevents private charity from lifting the poor.

Pennsylvania taxpayers have the 10th-highest tax burden in the country, according to the nonpartisan Tax Foundation. Just 10 years ago the state was closer to the middle, at 17th, but it has largely been a higher-tax state for decades.
Local spending drives property taxes, and government schools largely drive local spending. Property taxes fund about half of what schools spend; the other half comes from state income and sales taxes. Pennsylvania spends $12,995 per K-12 student each year, $10,205 of which goes to teacher salaries and benefits.

According to the latest figures from the U.S. Census Bureau — after the recession began — Pennsylvania spends $22 billion on K-12 public schools a year. Its schools hold another $26 billion total in outstanding debt, the fourth-highest schools debt load in the country. And the state’s pension system is underfunded by $29 billion.
This is why Pennsylvania has high property taxes: The state is deeply in debt, and it spends enough on education to send every child to a superb private school but doesn’t get anything like private-school results.

More than half the state’s fourth-graders are not proficient in math or reading, according to the latest National Assessment for Educational Progress. More than 60 percent of the state’s eighth-graders are not proficient in these basic subjects.
Switching where the state pulls taxes from one pot to another will not solve overspending. Some alternative policies can help, however.

One is the Taxpayer Protection Act. It would cap state spending to inflation plus population growth except in extreme circumstances. If it had been in place over the past decade, the average family of four would have had to pay $10,000 less in taxes.

That’s a good start. But state spending should not just hold still. If Pennsylvania taxpayers want relief, they’ve got to start demanding cuts.
Pennsylvania lawmakers could approve another measure that would save taxpayers millions while boosting the economy, personal freedom and education outcomes: school choice. Lawmakers managed to expand the state’s tax-credit scholarships this summer, making approximately 200,000 more children eligible to attend a school their families choose using money corporations donate to scholarship funds.
The program is enormously popular, having repeatedly reached enrollment limits. The average scholarship it grants is worth $1,165. Talk about bang for the buck.
Pennsylvanians should look long and hard at that $1,165 and $12,995, then at their property tax bills and local government debt, and start asking lawmakers to trim expensive programs that have rotten and unfair outcomes — such as government pensions and education — and expand inexpensive programs that offer people more freedom and opportunities.
Joy Pullmann is managing editor of School Reform News and an education research fellow at The Heartland Institute.