Proposed bill would shift school funding from property tax to income, sales tax
Posted: Wednesday, April 18, 2012 5:00 am | Updated: 7:15 am, Wed Apr 18, 2012.
Legislation in the state House would abolish the school property tax, the main source of funding for public schools, and pay for it by increasing the state income tax and sales tax.
The so-called “Property Tax Independence Act” would seem to help senior citizens and people on fixed incomes, who have complained to school boards that their Social Security or retirement money doesn’t keep pace with rising real estate taxes.
House Bill 1776, sponsored by Berks County Republican Jim Cox, would provide the same level of funding for schools across the state as they currently receive. But the money wouldn’t come from property taxes. Instead, the state’s personal income tax would rise from 3.07 percent to 4 percent. Additional funds would also be generated by closing loopholes in the state sales tax and raising the rate from 6 percent to 7 percent.
Homeowners pay approximately $10 billion annually in school property taxes, according to Cox. The lawmaker considers replacing the school property tax as a first step toward the replacement of all property taxes; the collection of property tax for funding municipal and county government would not be affected by HB 1776.
Two area lawmakers are among 59 co-sponsors of the legislation: Reps. Tina Davis of Bristol and John Galloway of Falls, both Democrats.
“I love the idea,” Galloway said. “First and foremost, the property tax is killing people in my district. People whose kids graduated from school 35 years ago are still paying this tax. It is something that scares the living hell out of them.”
Davis said taxes “should be based on your ability to pay. A senior making $900 a month can’t afford to pay what they were when they were able to work.” She called the bill “an attempt to be serious about the issue. It’s a great starting place, but there needs to be many public hearings.”
Sen. Dave Argall of Schuylkill County has a companion bill, S.B. 1400, that Sen. Bob Mensch, R-24, said he will support. Mensch said he was one of 43 votes several years ago on an ill-fated attempt by former state Rep. Sam Rohrer to end property taxes.
“Seniors and the mentally disabled shouldn’t have to liquidate their estate because they can’t afford property taxes,” Mensch said. “I don’t think we can implement a sea change tomorrow. I believe we need a phased in implementation. However, I’m voting for it.”
According to the bill, there will be a two-year phase-out of school property taxes. During the first year, property taxes will be frozen at their current level. During the second year they will be eliminated except for a small portion that will be retained in each school district to retire the individual district’s outstanding long-term debt.
Some lawmakers do not see the bill as the answer to the school funding issue.
Though he called property taxes “the most unfair tax we impose,” state Rep. Todd Stephens, R-151, said “I’m concerned House Bill 1776 sends even more money to Harrisburg and our area has habitually been shortchanged by Harrisburg when it comes to the school funding formula.”
Indeed, state Rep. Marguerite Quinn, R-143, said while some districts in other parts of the commonwealth receive state funding of 70 percent, Central Bucks is subsidized with about 15 percent of state money.
“This will be a difficult bill to pass as there are other parts of the state that do not have the problem with property taxes that we do,” she said. “I also want to make sure we’re looking at this with some realistic numbers. Also, there’s nothing in the act to prevent property taxes from coming back.”
To raise the necessary revenue to fund schools, the measure broadens the base of the state sales tax to include more candy, gum, newspapers, magazines, dry cleaning, laundry services, haircuts and spectator sports admissions. Clothing and footwear that cost $50 or more, nonprescription drugs and food items that are not part of the Women, Infants, and Children (WIC) program would also be included.
Items exempt include food stamp purchases; all utilities; home heating fuels; health, hospital, and dental services; prescription drugs; home health care; tuition; day care; and charitable organizations.
For an example of how the change would affect a property owner, Cox offers this scenario on his website: Completely replacing a $3,500 school property tax bill would require the homeowner to purchase $50,000 in newly taxed items at 7 percent to equal the amount of property tax eliminated.
David Baldinger is sold. The head of the Pennsylvania Taxpayers Cyber Coalition said 71 taxpayer groups are “firmly united” on the bill.
He said more than 10,000 Pennsylvania families lose their homes each year because of property taxes they can’t afford. And family farms, he added, have been “decimated” for the same reason.
The Pennsylvania State Education Association has not taken an official position on the bill, according to spokesman David Broderic. But he said the PSEA doesn’t support the elimination of property taxes completely. “For us it’s important to have a mix of state and local taxes so that the public schools can rely on stable, predictable revenues.”
The Pennsylvania School Boards Association is currently engaged in a review of this proposed legislation.
Jerry Shesney, a Warminster man who has spoken at senior centers across the state about freezing property taxes for seniors as well as pushing lawmakers to do the same, said he agrees conceptually with Cox’s plan, “but practically, it’s going to take a very long time to pass, if at all. We still think the senior tax freeze is more plausible and can be implemented more quickly.”
Galloway sees a number of positives in the legislation, including a boost in real estate values and a more friendly environment for business and job growth.
“If you were to move away from property taxes, you’d put billions of dollars into peoples’ pockets,” he said. “Instead of being forced to pay a property tax, you’d have free will or free choice to decide if you wanted to buy a stick of gum or a new refrigerator. Right now people have no choice. School taxes keep going up and up and it’s a drag on our economy.
“Let’s put everything on the table. Let’s talk about 500 teacher contracts. Let’s talk about teacher strikes ... teacher pensions, health care contracts. We need to talk about all of it, every cent from where we get it from to how it gets spent. We’re spending a ridiculous amount of money. It can’t be sustained.”
10 comments:
be sure to try the calulator. it says ill save 4000 dollars with the new way
I'll have to pay $1,500 more. That's not fair. I'm against it.
You must be a job creator.
This is nothing more than wealth redistributing socialism of the Marx-Lenin variety.
What happens when, not if but when, the economy slumps as it does from time to time and sales and incomes fall?
Raise the sales and income tax rates?
By what formula are the tax dollars allocated to districts?
Details details.
When sales and income drop, revenues drop.When people lose jobs and disposible income and revenues drop, there's less need for children to be educated. What part of this are you too dumb to understand?
http://www.youtube.com/watch?v=AFCrmWd3jtE
If history is any guide, should this pass, I predict in a few years, we'll have both increased sales and use taxes AND renewed property tax. We still have the Johnstown flood tax on alcohol, more than 70 years after its purpose was achieved. Government will take and take and take some more.
Uh huh. Be careful what you wish for.
HB1776? I'd be more impressed if they called it HB1861 or HB1929 and got it passed without all the over-wrought patriotic symbolism.
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