Call me crazy but I kind of like things like roads and bridges, parks and libraries, and driving on plowed streets in the winter. When I hear people complain about taxes I just can’t seem to summon the same ire. Maybe it stems from my time living in Canada where the majority of people I knew preferred the peace of mind that came with not having to worry about going bankrupt when they were sick in exchange for paying a healthy share to the Crown. More than anything else I feel comfortable with the fact that our tax dollars go to something in America that was once known as “the great equalizer”-public education. But guess what, folks, people on the right and the Betsy DeVos’ of the world would like you to believe that an educated populous is coming at too high a price.
Two weeks ago on our Democracy blog- Did you get your invitation?- I wrote about an initiative that will appear on the ballot next Tuesday, November 7th, regarding amending the PA Constitution to allow up to 100% of a home’s assessed value to be tax exempt. A “yes” vote on the resolution would pave the way for SB 76 to inch closer to being passed. SB 76, sponsored by Senator David Argall, is the actual bill that would eliminate school property taxes.
Here’s the essential question: if property taxes are eliminated how will public schools be funded? That money has to come from somewhere, right? What SB 76 does is shift school funding sources from property taxes to a combination of an increased Personal Income Tax (PIT) and an increased and expanded Sales and Use Tax (SUT).
Like so many of the ideas from the people on the right, what you’re being offered is not always what it seems. There is no better example of a trick rather than a treat than the perennial pushes for property tax elimination, so since it’s Halloween, let’s tear the mask off this baby!
First of all, let’s look at the core of the property tax elimination argument-that Pennsylvanians are unduly burdened by this tax. In reality, compared to other states, property taxes in PA are not that high. The real problem is that they aren’t uniform across the state. According to U.S. Census data, local property taxes in PA are slightly lower than the national average. In fact, PA ranked 26th highest prior to the last census. The average percentage that individuals pay in property tax as a percent of personal income in the U.S. is 3.3%. In PA, the average was 3%. Furthermore, PA residents don’t pay tax on Social Security income or pensions. In 13 other states they do. Arguing that Pennsylvanians are paying too much compared to their neighbors simply isn’t supported by the data.
Speaking of other states, many have experimented with eliminating property taxes with not so promising results. In 1978, California rolled back property tax assessments to earlier levels, limited taxes to 1% of assessed values, and also limited annual assessment increases. Just as Senator Argall wants to do in PA, funding for education got shifted to state income tax. After a 2001 recession, there occurred a budget shortfall which continues to this day in California. Schools were forced to cut programs and services. In Michigan in 1993, something similar happened when property taxes were temporarily suspended. Voters were given a choice to increase sales tax or income tax to fund schools. The voters chose to raise the state sales tax. When the Michigan economy faltered in the early 2000’s, schools were left in the lurch. Is this what we want for Pennsylvania?
One of the most concerning aspects of the education system in Pennsylvania is the egregious disparity which exists between school districts in terms of funding. Eliminating property taxes will do absolutely nothing to address this. In fact, funding disparities would be locked in.
Many proponents of doing away with property tax argue that it’s unfair to seniors who no longer have children in school. They claim that the elderly are even losing their homes due to this burdensome tax. While there is no denying that many seniors struggle to make ends meet, there is little evidence to suggest that this is a pervasive problem. Statistics from the PA Budget and Policy Center show that less than 0.2% of homes in PA are lost due to the inability to pay taxes. The state should have a responsibility address this issue, and there are better ways to do it. So do we really want to dismantle our entire school funding system over a problem that affects a handful of people?
Remember what I said-the money has to come from somewhere. One proposal is to raise the state income tax from 3.07 to 4.95%. That will only make up part of the lost revenue from eliminating property taxes. Another idea is to raise state sales tax from 6 to 7% and remove some of the exemptions we now enjoy on items such as clothing, food, and nonprescription drugs. But for the average Pennsylvania family, property taxes are less regressive than the existing sales tax. “The Institute on Taxation and Economic Policy estimates that families in the lowest income bracket spend over five times as much of their income on sales taxes as the top 1%. For property taxes, the difference is 2.7 times more. Adding many new goods and services to the sales tax base could make this disparity worse.” Property tax is a fixed amount that households can plan for and schools can count on in their budgets. What happens if there is a downturn in the economy? Or worse-a recession? This sounds extremely risky to me.
“What’s important to note is that, in addition to raising taxes overall, school property tax elimination provides no increase in overall education funding. If the aim of this legislation is to provide tax relief to middle class Pennsylvanians, while also increasing the quality of public education in Pennsylvania, our analysis shows it fails on both accounts,” said Mark Price, a labor economist at the Keystone Research Center.
Perhaps the biggest pipe dream of the legislators trying to push this scheme is that it’s going to help the middle class. First of all, everyone will still have to pay municipal and county taxes and pay off any outstanding school debt a district may hold. Therefore, your property tax bill will not be a nice round zero.
Eliminating property taxes will be a huge windfall for one portion of the population-corporations-paid for by shifting the burden to individuals like you and me. While seniors will pay more taxes on essential items like food, home care services, and health-related items, corporations would benefit, since business to business transactions are often tax exempt. P.S. There are no plans in SB 76 to increase the corporate income tax rate.
I’ll leave you with this. Nobody loves paying the taxman (not even me), but what property taxes buy benefits the community as a whole in less tangible ways than those I mentioned earlier like roads and bridges. It’s not just about building better schools which in turn increase property values-it’s about investing in something far more precious-the future of our children.
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posted by Amy Levengood
Val Monroe-Myers, contributor