A taxing situation
CHRIS PARKER/TIMES NEWS State Rep. Seth Grove, state Sen. David G. Argall, state Rep. Jerry Knowles and state Rep. Doyle Heffley listen to questions at a property tax hearing Thursday in Lehighton.
Ron Boltz did his homework before buying a house in Pine Grove Township in 2008, carefully figuring how much money he would need to pay the mortgage, heating and the $2,020 annual school district property tax.
But several months later, he opened his mail to discover that the school district had launched a reverse assessment appeal that doubled the levy to $4,800 a year.
Boltz, who successfully challenged the new assessment, spoke at a 3-hour hearing in Lehighton Thursday on school district property taxes. The hearing, which drew about 65 people, was called by Republican state Sen. David G. Argall and state representatives Doyle Heffley, Jerry Knowles and Seth Grove, R-196.
"We have to find a different way to generate revenue," Knowles said.
Property owners across the state pay about $13 billion a year in school district real estate tax: $9.1 billion from home owners and $3.8 billion from commercial properties, according to Grove. Further, school property taxes have increased by $4.77 billion, or 77 percent, between 1998 to 2009, while state funding for school districts grew by $3.65 billion, or 66 percent, he said.
All four on the panel intend to pursue legislation that would eliminate the property tax, shifting the revenue generation instead to a broader-based sales tax and/or a higher state income tax. The sales tax, on goods and services, would apply to "everything," Argall said.
Grove cited baffling aspects of the current sales tax, including that pool service, airplane mechanical service and antiperspirant are not subject to sales tax while deodorant and car mechanical repair are taxed.
The proposal would keep school funding levels at their current rate, but would also force districts to curtail expenses.
"If you don't control the spending, you don't control the problem," Argall said.
Argall and Heffley, along with Democratic state Sen. John T. Yudichak in April introduced legislation that would allow voters in November to choose from among the four best property tax reform proposals, to be determined by the number of co-sponsorships each bill receives.
In addition to shifting revenue generation from property tax to an across-the-board sales tax and/or higher income tax, there are proposals to freeze the tax rates for senior citizens; eliminate property tax for senior citizens and to reform property tax assessments.
Property tax elimination is a touchy subject, however. In 1989-1990, a proposal to shift the property tax for a personal income tax, on a dollar-to-dollar basis, failed. Grove attributed the failure to voters who feared the property tax relief would be temporary while the sales tax would be permanent. Further, neither the Legalized Gaming/Slots Act of 2004 nor the 2006 Taxpayer Relief Act made much of a dent in the property tax burden.
Property tax elimination is, predictably, most heavily favored in areas of the state where higher numbers of people own their homes. In areas like Philadelphia and Pittsburgh, Grove said, people are more likely to rent and thus lack the motivation to work for reform.
However, Gov. Tom Corbett signed into law Senate Bill 330, which removed nearly all the exemptions that allowed school districts to increase property taxes above the Act 1 (2006) index except for those relating to special education and pensions.
"It's a good first step," Heffley said.
Act 1 allowed a trade from Earned Income or Personal Income taxes to property tax; use of gaming revenue; expansion of the property tax/rent rebate program and allowing a back-end referendum that allows people to vote on tax increases above a cost-of-living increase, or "index."
School property taxes are the heftiest levies born by homeowners, said David Baldinger, PA Taxpayers Cyber Coalition. He likened the tax to rent a homeowner pays to the government on his own home.
For the coalition, nothing less than the elimination of property tax will do. In fact, the coalition wants a Constitutional amendment that would abolish property taxes. He said the tax system is antiquated; it's arbitrary and unfair; it contributes to a lack of educational cost controls; it's not stable; it's inequitable and a drag on the state's economy.
Eliminating the tax would draw more business to the state, boost the sagging real estate market, prevent foreclosures, stabilize school funding, create jobs and give the state a "massive economic stimulus," Baldinger said.
Most audience members who spoke favored eliminating the tax.
Russ Frank said that "if everyone shares the sales and service tax, it will be equitable."
However, Lehighton area real estate agent Aggie Shehadeh argued that taxing all goods and services would hurt the poor. She suggested that some services be exempt. That prompted Argall to say that picking and choosing which goods and services were taxed would be unfair.
Meanwhile, Boltz and another homeowner, Carl Swartzentruber, whose property tax was doubled by a reverse assessment appeal by the Schuylkill Haven School District, said voters also need to take aim at the reverse appeals practice.