'Property Tax Independence Act'
Sen. David Argall
Area residents and state legislators are working to eliminate the state's school district property taxes. They aim to replace this tax with what they say is a more fair and equal way to financially support Pennsylvania school districts.
The "Property Tax Independence Act," Pennsylvania House Bill 76 and Senate Bill 76, has been introduced for a second time in the Pennsylvania House and Senate. The bill was developed by the Pennsylvania Coalition of Taxpayer Associations, a coalition of 78 non-partisan advocacy groups dedicated to school funding reform.
"The bottom line is, we're looking for a fairer way to fund public schools. We would like to completely eliminate the school district property tax, which is very outdated and unfair," said Sen. David Argall, the prime sponsor of the Senate bill. "I think people are tired of past efforts to tweak the tax and reform the tax. We believe that it is so archaic that it needs to be completely eliminated, so that it can never come back."
Argall noted that under the current system, homeowners are penalized through higher property taxes when they remodel their home. Recent homebuyers are also likely to pay higher taxes, as many homeowners had their property values reassessed based on their home's purchase price.
"We're funding the public education system based on when you bought your house, and if you remodeled your home. It's a crazy way to fund the education system," he added.
This bill was last introduced during the 2011-2012 legislative session and has been reintroduced this year with greater support by both the House and Senate.
As proposed, the Property Tax Independence Act would replace all school property taxes with funding from the Pennsylvania Personal Income Tax and the Sales and Use Tax. Because school property taxes currently account for $10.6 billion, the bill also calls for a small increase to income and sales tax to replace this lost revenue raising the state Personal Income Tax from 3.07 percent to 4.34 percent, and increasing the sales tax by 1 percent. In addition, some items that are currently exempt from state sales tax would now be taxed, including candy and gum; food items not on the WIC food list; newspapers, magazines and textbooks; clothing items valued at $50 or higher; personal care services; sports, performing arts and amusement tickets; and air and ground transportation.
"The schools will get just as much under my plan as they would have under the existing law. We're going to match, if the school gets $10 million from local tax, they will get $10 million next year from sales and income taxes," said Argall.
Projections by the Independent Fiscal Office (IFO) in Harrisburg indicate that the proposed bill would have a neutral impact on school districts, collecting relatively the same amount of funds each year from the increase in sales and income taxes while moving the cost of public education from homeowner-based funding to a more inclusive funding system. Projections and supporters of the bill also claim that eliminating property taxes will improve the local and state economies by increasing expendable income, and help to stabilize and improve the housing market through increasing home values by an estimated 10 percent.
"Property taxes are a huge issues throughout Carbon County," said Rep. Doyle Heffley, a supporter of the House Bill 76. "Many families base their decision on whether they can buy a home on this issue. They can afford the mortgage, but they can't afford the property taxes. While everybody needs to pay taxes, property taxes just put the burden on a small portion of our society."
Louis LaRizzio Jr., the local representative for the Carbon Coalition of Taxpayers, noted that there are many homes are up for Sheriff's Sale each month due to unpaid property taxes more than 50 homes are scheduled for sale in June.
"Families are kicked out of their homes if they can't pay their taxes. These are children who will be pulled out of their schools, whose family lives will be disrupted," he said. "People are getting thrown out of their homes every day because of property taxes. No tax should leave you homeless."
He added that due to Carbon County's recent practice of reassessing homes on their sale price, he pays significantly more in property taxes compared to other homeowners in his area. His annual tax bill is approximately $6,000.
"That's huge. If I had an extra $6,000 per year, I wouldn't have to pinch pennies to save for my taxes. I would be spending money, stimulating the economy, and paying more sales tax. I have to believe that everyone else would do the same thing," he said. "The way that they do property taxes is absolutely unfair. With this Act, everybody would pay their fair share of taxes across the board."
Argall noted that the IFO's analysis of the bill showed that retired homeowners would see a significant reduction in taxes, paying up to 38 percent less in taxes each year. Working-age homeowners would see a tax cut of about 7 percent, likely enough to offset the cost of increased income and sales tax.
"Everyone's situation will be different. But if their property taxes keep going up and up every year, that's not something that they have control over. With sales tax, there is more of a voluntary effort. If you don't buy it, you don't have to pay the tax on it," he said. Argall also noted, "These are taxes that you can count on being fairly stable, with steady and predictable growth.
"Whenever we have asked people about this legislation, this bill does exactly what I have been asked to do. I'm not going to pretend that it's perfect, but it's a major improvement over the existing system."
While the majority of local state representatives support the bill, LaRizzio and local representatives are encouraging Pennsylvania residents outside of our area to contact their representatives and ask them to support the Property Tax Independence Act.
"We think that the grassroots efforts of the taxpayer groups are really having an impact," said Argall. "If they have friends and relatives outside of Schuylkill or Carbon county, they should encourage them to contact their local representatives."
"Our movement at the Pennsylvania Coalition of Taxpayer Associations is a bottom-up, grassroots movement that needs to be pushed hard by the taxpayers to get it enacted," added LaRizzio. "We're fighting for them, so that people can stay in their homes. We're tired of the unfair property tax."