The Unspoken Obstacle To Property Tax Reform

Last week the issue of property taxes took center stage in the Pennsylvania House of Representatives. Hours of debate over multiple days led to one bill being passed with two other proposals, in the form of amendments, being shot down.

The legislation that passed was HB 1189, which allows school districts to levy other types of taxes to eventually replace property taxes at the local level. It would be left up to the school district whether they want to change its system or keep the status quo. The replacement taxes could include wage taxes or taxes on business receipts.
 
I voted in support of this bill because it gives local communities the ability to decide the best way to fund their schools without mandating anything from state government. I certainly don’t think HB 1189 is a perfect solution, but if a district wants to try another method to eliminate property taxes, I believe they should be allowed to do so.
 
One of the major misconceptions about property tax reform is the idea that if we just notched up the sales tax or personal income tax a little bit, we could totally eliminate property taxes. Unfortunately the math simply doesn’t work; property taxes statewide total about $13 billion per year, so there has to be a real sacrifice to make up that kind of money.
 
An amendment to HB 1189 tried to do just that, and the harsh realities were exposed. The amendment, which was pretty much identical to the often-discussed HB 76, would totally eliminate property taxes by raising the personal income tax from 3.07 percent to 4.34 percent, and taking the state's sales tax from 6 percent to 7 percent.
 
The amendment would also have extended the sales to some foods and other services that are currently exempted from it. This is no small detail; the list of services currently exempt that you would have to pay sales tax on is extensive and would have a real impact for virtually every Pennsylvanian.
 
The amendment, which also failed to take into account important issues like inflation and school construction costs, was poorly drafted and would not have been good law. I voted against the amendment, which failed by a vote of 138-59. Although the idea of a shift in sales and income tax to eliminate property taxes may be the right answer at some point, this plan was not ready for prime time and I just couldn’t support it.
 
Another amendment offered to HB 1189 would have increased the Property Tax and Rent Rebate program to include 100% of the residential homestead; in other words, it would have totally eliminated property taxes for senior citizens making under $55,000 per year. Because I understand that senior citizens on a fixed income face serious challenges from increasing property taxes, I assumed this amendment would be a no-brainer and gladly voted for it.
 
Unfortunately, the Republican majority in the House of Representatives voted the amendment down without really giving anyone a good explanation, but I think I have an idea. The business community makes out much better financially under the current system; big corporations are more than willing to let your property taxes do the heavy lifting instead of increased sales or income taxes, which would force them to share some of the burden with regular people.
 
Winston Churchill once said, “Democracy is the worst form of government except for all those others that have been tried.” To those in power who are saving billions of dollars by you paying the lion’s share of the property tax burden, the current system is the worst except for all the others that have been proposed. As long as the current regime led by Tom Corbett and his corporate donors are calling the shots, the big business interests are going to win out over the little guy every time. It stinks, but it’s the truth even if no one wants to admit it.