Attempts to eliminate school property taxes have failed in Pennsylvania, but an ongoing grass-roots initiative has been making headway to provide struggling homeowners some relief.
Crafted with the assistance of a coalition of taxpayer groups across the state, The Property Tax Independence Act has garnered 26 co-sponsors in the state Senate to date, according to Luzerne County Property Owners for Elimination of School Property Tax President Charles Urban.
“We have over 40,000 people who lose their homes and 350,000 foreclosures each year. This affects people on limited incomes — senior citizens who work all their years to own a home. People that have mortgage payments find their school taxes are two-thirds higher,” Urban said at a seminar on Thursday at King’s College in Wilkes-Barre.
Urban introduced Chuck Liedike, of the Pennsylvania Association of Realtors and campaign manager for Real Reform 76, who explained to a nearly packed auditorium what Senate Bill 76 would do:
• Phase out school property taxes over a two-year-period, freezing them the first year and eliminating them the second.
• Increase the state sales tax from 6 percent to 7 percent. Many currently tax-exempt items would be taxed. For example, foods that are not on the Pennsylvania WIC (Women, Infants and Children) program list would be taxed, as would articles of clothing that cost more than $50, all personal services including funeral services, and certain recreation, transportation, legal and architectural services.
• Increase the state earned income tax rate from the current 3.07 percent to 4.34 percent.
• Allow school districts to impose local personal income or earned income taxes if more revenue was needed, but only by referendum, with no exceptions.
Liedike said that a taxpayer who saw $1,000 in school property taxes eliminated would have to spend an additional $14,286 on newly taxed goods to equal his or her former once-a-year property tax contribution.
A ‘Zip Code battle’
State Sen. John Yudichak, the prime sponsor of Senate Bill 76, said Harrisburg legislators who don’t want to address the issue of property tax problems are “passing the buck to school districts.” He also described a “ZIP Code battle” that makes attempts to eliminate property taxes difficult, to say the least.
“If you happen to live in a wealthy ZIP code that has a blossoming commercial district and a healthy housing district, you’re going to have a great school. But if you live in the old coal company towns that I grew up in and you lost your industrial base and you lost your housing base, then you’re condemning a generation of children to an inadequate education,” said Yudichak, D-Plymouth Township.
State Rep. Eddie Day Pashinski, one of only two local state legislators who have not fully endorsed the bill — the other is Rep. Phyllis Mundy, D-Kingston — also spoke at the seminar to show his support for property tax elimination. But he also raised concerns about the legislation.
Pashinski, D-Wilkes-Barre, said he wants to see an amendment that would create a reserve fund in case a sluggish economy causes sales and income tax revenues to fall.
He also favors property tax elimination only for homeowners, requiring businesses to continue paying it.
Because that would be unconstitutional in Pennsylvania, he proposes a referendum to pass a constitutional amendment that would allow it to happen. He also points to studies that have shown a $1 billion shortfall in funding.
Liedike says the shortfall is a myth because it is based on the assumption that schools are projected to increase property taxes by $2.2 billion (16 percent more than double the rate of inflation) from 2015 to 2019. But the Act itself would prevent that sharp spending hike by school districts from happening.
“In other words, school districts will still see increases in their funding every single year, just not what they would have received if they were collecting property taxes. The billion dollar shortfall is actually a billion dollars in tax relief,” he said.
Liedike also said that eliminating property taxes for businesses would enable them to help the economy, with more money available for hires, capital investment and/or reducing prices.
Charles Adonizio, president of the Wilkes-Barre Realtors Association, said the legislation would better enable young adults afford to buy a home.
The Pennsylvania Realtors Association is in full support of the legislation and has sent out more than 100,000 mailers promoting it, Urban noted.
Not all on board
While local state Reps. Tarah Toohil, Jerry Mullery, Mike Carroll and Karen Boback all support the bill — and state Sen. Lisa Baker is a co-sponsor — Pashinski said legislators in richer districts and cities that already have a higher sales tax (currently 8 percent in Philadelphia and 7 percent in Pittsburgh) are less likely to support the bill.
That’s why, he said, more work is needed to improve it.
There is also opposition from industry, teachers and other groups.
The Pennsylvania Chamber of Business and Industry does not support the bill because it would hit businesses with new taxes (even though business-to-business transactions would remain exempt) and encourage Pennsylvanians to travel out of state to shop, said Lindsay Andrews, senior communications director.
Sam Denisco, the Chamber’s vice president of government affairs, said most small business owners pay personal income tax, and it would increase 40 percent.
The Pennsylvania State Education Association does not endorse the bill because “it would exacerbate the public school funding crisis,” said spokesman David Broderic. He said the legislature should look at ways to properly fund schools rather than shift the tax burden.
Several other organizations, such as the Pennsylvania Newspaper Association and American Institute of Architects don’t support the legislation because members’ products and services currently exempt would be taxed.