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Eliminate school real estate taxes? Then what?

We’ve been hearing this chorus for years. Nothing significant has happened, but the choir is getting louder. And angrier. They’re mad as hell, and they said they won’t take it any more.

The truth is there is not much anyone can do about it unless the state legislators get off their collective duffs and transform the tax laws that have been in existence for more than three centuries, since real estate was determined to be the bedrock of a person’s wealth.

By one estimate, to eliminate school property taxes would mean raising about $14.5 billion from other sources. In other words, other taxes would have to climb. The most logical ones would be the state income and sales taxes.

How much is $14.5 billion? It is nearly half of the entire general fund budget for Pennsylvania.

Some groups such as senior citizens living primarily on Social Security and low-income families would be the chief beneficiaries of real estate tax elimination. Higher wage earners would have to fill the gap, so, as you might imagine, this will be a bitter pill for them to ingest.

A decade ago, most state legislators thought the idea of real estate tax elimination was a pie-in-the-sky idea, but now that concept is not nearly as far-fetched as it once seemed.

It’s not known yet whether the state Senate may get close this session to passing a bill to eliminate this onerous tax for the first time in state history. Even if it does, however, there is no guarantee that it will pass the much more unpredictable state House of Representatives. Gov. Tom Wolf has not tipped his hand on what he might do in the unlikely event that such a bill winds up on his desk during the current session, but last year the state education secretary said this issue was not a priority.

Right now, both houses and the governor are preoccupied with passing a budget for fiscal year 2019-20. Since the state is awash in surplus cash for a change, the process, whose deadline is Sunday, is not expected to be as contentious as it was during the first few years of Wolf’s first term. Wolf was re-elected last November and is serving his second and final four-year term. Pennsylvania governors have two-term limits.

Our local state senator, David Argall, R-Schuylkill, has been the relentless promoter of the property tax elimination bill. He came oh-so-close in 2015, and again last term. Since his bill died at the end of last year, it must be introduced again this session, where he hopes it will get a fair hearing from the Republican caucus.

In pushing this bill, Argall is preaching to the choir. Many of his constituents throughout Schuylkill are begging for property tax relief. Yet, each year, school districts keep raising taxes, saying they have no choice because costs continue to increase, but property values are not keeping pace, and state help is static. Nor are they alone. The same is true in many other local school districts.

“It’s easily the number one issue in the district that I represent,” Argall told The Associated Press. “I can’t go to a Cub Scout meeting or get a flat tire fixed without someone asking me about this issue.”

Since Sunday is also the deadline for districts to pass their 2019-20 budgets, howls of protest have been going up in some districts, most notably Panther Valley, already considered a much-distressed district. The school board reluctantly raised the real estate tax rate by 3.5 mills in Carbon (Lansford, Nesquehoning and Summit Hill) and 3.39 mills in Schuylkill (Coaldale).

There are lots of reasons why property taxes have outlived their usefulness. They use arcane determinators such as assessments and millage. They have become a millstone around the necks of low-income residents whose only major asset is their home. They are expensive to collect, and spotty enforcement enrages law-abiding citizens who see some of their neighbors get away with trying to game the system.

Argall minces no words about our current system. He says it is “rotten to its core,” a throwback to the 17th and 18th centuries when wealth was measured by property possession. The other maddening factor is that if you improve your property, you are not rewarded; you are penalized with additional taxes.

Argall’s bill would raise the state income tax from 3.07% to near 5% and bump up the state sales tax from 6% to 7% along with adding a number of items to be taxed that are tax-exempt now, such as clothing over $50, medical services, cable TV, day care costs and funeral services.

One of the big objections some legislators have to the change is the lack of stability the income and sales taxes have in tough times, whereas property taxes remain more predictable.

I find that to be a red herring, because in tough times many low-income wage-earners who own their own homes default on mortgages, so school districts would not get the taxes under those circumstances.

By Bruce Frassinelli | tneditor@tnonline.com