Here's why we have no Pa. property tax reform

http://www.ydr.com/story/opinion/readers/2015/12/02/heres-why-we-have-no-pa-property-tax-reform/76684094/

People have repeatedly told me school property taxes are their biggest headache, and they want their elimination to be a top priority.

People throughout the 48th Senatorial District have repeatedly told me school property taxes are their biggest headache, and they want their elimination to be a top priority of the General Assembly.  This much-needed and long-overdue goal recently fell one vote short when the Senate attempted to amend the provisions of Senate Bill 76 into another bill.A big problem in advancing SB 76 is lingering concerns with its companion:  the House rejected HB 76 (59-138) because opponents said the numbers didn’t work and it was flawed.

In response to these concerns, Sen. Argall and I worked to correct the deficiencies of HB 76.  We met with opponents to hear their concerns.  We studied Independent Fiscal Office analyses and dissected pages of comments from the Pennsylvania Department of Revenue on the bill as originally drafted.  Prior to the Senate vote, SB 76 was further refined to ensure it’s technically correct and works.  It is and it does.To eliminate school property taxes requires nearly $13 billion in replacement revenues.

  There are just four alternatives to raise the $13 billion to eliminate school property taxes:  Personal Income Tax (PIT), Earned Income Tax (EIT), Sales & Use Tax, and/or another (new) tax.  Three of these four options are incorporated into SB 76:  PIT, Sales and EIT.To eliminate school property taxes, SB 76 proposes a combination of changes in sales and personal income taxes.  The sales tax would be broadened and expanded to 7 percent and the PIT would be increased from the current 3.07 percent to 4.95 percent.  Locally, schools could raise additional funds through either a local PIT or EIT – after voter approval.I prefer sales taxes to replace school property taxes because i believe people have some control over paying consumption taxes, more people pay sales taxes than those paying property taxes, and the sales tax is paid with each purchase while property taxes are large bills.Increasing the sales tax rate to 7 percent (8 percent in Pittsburgh and 9 percent in Philadelphia) and expanding the base (food items not on the WIC list, clothing over $50, and certain services) would raise about $6 billion in replacement revenues.  Raising the PIT from 3.07 percent to 4.95 percent would raise another $7 billion in replacement revenues to eliminate school property taxes.

To calculate how proposed SB 76 changes would impact you, compare what you now pay in school property taxes to what you would pay under an expanded PIT and sales tax.  For the latter, you would need to spend an additional $14,285.71 in newly taxable items for each $1,000 you now pay in school property taxes.Like any tax, shifting from one tax to another has different impacts on different taxpayers.  SB 76 opponents focused on this.  Unfortunately, they offered no alternatives, simply promising to “continue to offer our expertise and assistance to develop a responsible approach to address concerns where it is most needed, using sustainable and proven strategies.”

Opposing SB 76 with no alternatives means you support the status quo.Total elimination of school property taxes is hard – especially with just four options for equal revenues.  It’s why elimination has proven to be so elusive for so long.Act 511 was passed 50 years ago to reduce the burdens of school and municipal property taxes through a myriad of other taxes, including:  amusement taxes, mercantile and gross receipts taxes, business taxes, realty transfer taxes, per capita taxes, personal property taxes, occupation and occupation privilege taxes, and local Earned Income Taxes.  These taxes proved equally unpopular and were changed or repealed over time while school taxes continued to increase.In 1987, Gov. Casey and the General Assembly sent voters a bipartisan plan to reduce reliance on property taxes through expanded wage taxes, optional personal property and county sales taxes, realty transfer tax for municipalities, municipal service fees, property tax millage restrictions and payments for tax-exempt properties.  That plan was overwhelmingly rejected by the voters statewide by a margin of over 4-1.

During the Rendell administration, gaming and a subsequent expansion of gambling was promised to reduce property taxes by a minimum of 20 percent.  It didn’t, it hasn’t and it never will.Rather than focusing on the merits of total elimination of school property taxes, opponents focus on the tax shift of SB 76.  However, unlike the House debate, the arguments against SB 76 concentrated on policy rather than technical issues.All the rhetoric against SB 76 doesn’t change the fact it works and the numbers add up.  Those who support eliminating school property taxes support SB 76.  Those who oppose SB 76 – or say there’s a better plan – should now step forward.  Otherwise, you’re supporting the status quo, which has prevailed for far too long.  We’re waiting for your plan.State Sen. Mike Folmer is a Republican from Lebanon. His district includes parts of York County.