Any move toward a fairer form of school taxation in Pennsylvania is, well … good news.
Yet property taxpayers, particularly older homeowners on fixed incomes, know the routine well. They’ve been waiting for tax reform for much of their lives. They’ve seen full-throttle attempts, halfway measures and “local empowerment” efforts come and go.
Then the school property tax bill arrives in July, with little or no relief. And a demand for more money.
So what’s changing?
Two weeks ago a state Senate working group emerged from a month-long study with five options to relieve school property tax pressures. Four of the proposals offer mixed bags of tax reduction. The fifth calls for total elimination of school property taxes — the holy grail for activists and oppressed taxpayers.
The bipartisan School Property Tax Work Group, chaired by Sen. David G. Argall, R-Schuylkill, is trying to identify tax relief that can win majority support in both houses — an acknowledgment that property tax elimination, still the avowed goal of many, remains locked in neutral.
Here’s a thumbnail sketch of the proposals:
Plan one: Reduce school property taxes by $8.62 billion, increasing the personal income tax from 3.07% to 4.07%, and raising the sales tax from 6% to 7% to provide money for homestead exclusions. School districts would have to levy a local earned income of at least 1%. The Property Tax and Rent Rebate Program would be expanded.
Plan two: Cut school property taxes by $6.44 billion through an increase in the personal income tax from 3.07% to 4.62%.
Plan three: Raise the personal income tax from 3.07% to 4.32% and cap rebates for homestead properties at $2,340, effectively eliminating school property taxes for more than 2 million homeowners.
Plan four: Boost the personal income tax from 3.07% to 4.72% and cap the homestead rebate at $5,000, effectively eliminating school property taxes for more than 3.1 million homeowners.
Plan five: Get rid of the school property tax. Raise the personal income tax from 3.07% to 4.82% and the sales tax from 6% to 7%.
If it were easy to kill school property taxes, it would have been done years ago. Resistance draws from several conflicts, not the least of which is local control vs. state control of school funding. Districts with healthy tax bases want local board members to decide what the community can afford to spend on K-12 education, not a formula by the state. Poorer and inner-city districts want a fairer and more equitable distribution of state money; a multi-district lawsuit is trying to force that issue right now through the courts.
Other “what if” outcomes are cited by opponents: Raising a flat income tax (as opposed to a graduated one) hits low-income workers the hardest. Eliminating all school property taxes provides a windfall for commercial property owners, and those with lavish second or third homes. Renters wouldn’t share in the tax relief.
The other side of the argument is well-known: Lives are greatly diminished. People on limited incomes sell their properties because of ever-rising school taxes, after decades of maintaining a home and supporting local schools. Their dilemma has fueled support for HB/SB 76, the Property Tax Independence Act, which has come close to majority support in previous years in Harrisburg but fallen short.
Another measure, raising the percentage of property value that can qualify for the homestead exemption, was approved by voters in a 2017 referendum, but it requires local action. Earlier this year a legislator proposed taxing retirement income and extending sales tax to food and clothing to eliminate the school property tax. It went nowhere.
A renewed “reduction vs. elimination” debate offers some hope — assuming it doesn’t shrivel up in the heat of next year’s state legislative elections.
It’s a starting point. There have been precious few of those lately.