Hike Pa. Income Tax to Cut Property Tax?
Lawmakers are considering a major shift in tax burden for Pennsylvanians
By Melissa Daniels/PA Independent
HARRISBURG — Exchanging school property taxes for hikes in other taxes could come with a bigger increase in personal income tax for Pennsylvania wage earners than previously suggested.
The House Finance Committee on Monday held a second public hearing on House Bill 1776, or the Property Tax Independence Act. The bill, sponsored by state Rep. Jim Cox, R-Berks, aims to achieve the long-discussed goal of eliminating property taxes to fund public schools by creating increases in sales and personal income taxes, as well as the inclusion of previously untaxed goods and services.
But new figures from the state Department of Revenue show a $3.5 billion gap between the estimated $12.5 billion earned by property taxes, and what the new tax structure would raise. In response, Cox said he and bill co-sponsors would consider increasing the personal income tax even further to meet the mark.
Given the new figures, some representatives were uncertain about the plan's ability to support the needs of public education. At a public hearing for the bill two weeks ago, the funding gap was estimated at $500 million, said state Rep. Phyllis Mundy, D-Luzerne, House Finance Committee chairwoman. But leaving a gap of at least $3.5 billion puts districts in “a horrible bind,” Mundy said.
“We do need to shift sales and income tax or some sort of revenue to replace property taxes,” Mundy said at the hearing, “but in your bill, there seems to be, even now, a lot of confusion on exactly how much revenue your bill will generate.”
Cox said eliminating property taxes isn’t about sticking school districts with a shortfall. Revenue neutrality is the goal, he said, though he doubted the $3.5 billion figure. "We’re in agreement the personal income tax is the place we would need to look to fill that void,” Cox said.
Cox has generated support for the bill among 70 co-sponsors, 20 of whom are Democrats, as well as state residents.
Pennsylvania's personal income tax rate is just more than 3 percent, the lowest flat tax rate personal income tax in the nation. Cox’s original plan would boost that rate to 4 percent, a nearly 33 percent increase, which, according to estimates from Cox's office, would bring in $3.46 million annually.
A sales tax increase would be from 6 percent to 7 percent statewide, with the exclusion of Pittsburgh and Philadelphia, which would see 8 percent. Mark Robyn, an economist with the Tax Foundation, a national taxation research group, said that while other states dedicate a specific tax to a specific need, focusing on income tax is a unique choice because it usually funds general government services.
“You don’t know where your public service demand might change in the future,” he said.
But to Cox, changing the funding from property taxes to sales and income taxes along with expanding taxes on goods and services makes the system more fair.
"The goal of this legislation is about getting the question before the House and before the Senate: Do we want to change the source from a local school district tax which is burdening homeowners, driving people out of their homes, to something we feel is more fair and more stable and more able to directly reflect the economy, the ebbs and flows the economy more directly, without compromising home ownership?"
Citing the 10,000 homeowners who lose their property annually because of inability to pay property taxes, Cox reminded lawmakers they were elected to represent taxpayers, and not the special interests.
Those who opposed the legislation Monday included the Pennsylvania Bar Association on the grounds of expanding taxes to legal services and the Pennsylvania Retailers Association because of potential negatives effects of an increased sales tax.
Groups that support the act include the Pennsylvania State Grange, Pennsylvania Farm Bureauand Pennsylvania Coalition for Taxpayers Associations.
The committee is scheduled to vote on the act Monday.
mark wood
8:32 am on Sunday, June 10, 2012
what makes you think that raising taxes cures your spending,? now I know I am reading the ignorant and arrogant of the spending thiefs, I will never give blood or donate money until the thiefs(folks who steal our money from a tax base) are removed from office. Rasing taxes really cures you woes of being in debt? where the hell did you go to school? Pennsylvania solialist school of thiefs? You commie bastards will never learn, NEVER, and I can tell the rest of you slaves could care less, just buy you non-action. Pay losers and keep paying and when I read about you sorry butt problems with not enough money to pay your tax bill. thats just to damn bad, I laugh when the stste takes you property that you worked you your self to death paying for and the state takes with a stroke of a pen, ALL LOSERS < ALL!!!!! To bad Pennslvania can't print its own dollars, then we can be like all the other FIAT currencies ihn the world. WORTHLESS. Drop dead with you tax increase,
QED
1:59 pm on Sunday, June 10, 2012
Lunatic. Go comment on the Morning Call's site.
mark wood
8:33 am on Sunday, June 10, 2012
one comment tells volumes, NO ONE READS YOUR PATCH..........................
Amend Wun
9:20 am on Sunday, June 10, 2012
What's up with some of the posters on here?
Jeff
9:51 am on Sunday, June 10, 2012
I do agree with Mr. Wood that raising taxes is not the answer. The rest of the rant,.....I won't go there.I fully support HB 1776, as a home owner I get hammered every year with higher and higher taxes. Those who don't own a property may get a slight rent increase. The tax burdens should not be on the home owner, they should be levied on everybody. As a parent of one child, I can see how people feel it is not fair on the people who do not have children to have to pay these School district taxes every year, as it is not fair that I pay the same rate as someone who has 4 or 5 children attending schools.Maybe to close this "gap" they speak of, they could charge a small fee to parents who have children currently attending schools. Socialized education isn't really the way to educate our children on the values and rights in our nations founding documents.
Marguerite
9:56 am on Sunday, June 10, 2012
Reading the comments of mark wood, I am struck by the poor quality of the education he has received. Was he educated in PA's public school system or elsewhere? Perhaps he dropped out of school, figuring he had nothing else to learn? Maybe he was just not bright enough to learn proper spelling or grammar. Whatever the answer is to his apparent borderline illiteracy, I have difficulty taking very seriously someone who is so obviously uneducated.
I do think that finding an alternate method of funding schools makes a great deal more sense and is inherently more fair than taxing property value.
Mike Zweifel
10:47 am on Sunday, June 10, 2012
I think they should have added sales tax to food sales. This way even those who get free food would pay a tax and help us homeowners.
craig anthony
10:57 am on Sunday, June 10, 2012
I certainly feel better when I fill my car with gas and pay from the left pocket rather than the right pocket. This should work as well. Maybe lowering the expense side would work evev better.
Amend Wun
11:02 am on Sunday, June 10, 2012
@Jeff- I'm not sure how one can say that socialized education is not the right way to educate our children. Would it be preferrable to return to an era that's strictly a private schooling system where only those affluent enough are capable of gaining an education, where illiteracy is the norm and social strata become even more entrenched? Education is considered one of the great equalizers. Were you not yourself educated in the public school system? That's not to say that things don't need to change, but implying that the public school system should be done away with seems particularly short-sighted and myopic. I dont have any children myself, but I can easily grasp the value and importance of an educated populace, and It's way cheaper to educate children then to incarcerate adults.
qflux
11:20 am on Sunday, June 10, 2012
Here is the problem... What's going to happen is what has already happened in NJ, NY and elsewhere. Property tax will go *up* alongside increased sales and income taxes. Anyone who feels they have plenty of extra money to keep paying ever increasing taxes should consider why so many run from NY and NJ.
If spending isn't brought under control, there will *never* be stability. NJ has some of the absolute *highest* taxes in the country, and has some of the most affluent people, and *still* runs a deficit that never catches up so has seen *increases* on the middle class that are crippling during a monster recession. The millionaire tax, however, was of course shot down.
PA is basically inching towards the NJ model. Time to find somewhere else to live (other than the NE), I suppose. As an upper middle class tax payer, I'm tired of seeing my quality of life drop steadily year over year as my salary stays flat and expenses continually increase thanks to voracious municipalities. Punishing the people that stay well employed while multi millionaires and billionaires continue to pay nothing is a recipe for disaster, but the under employed seem to love it and, of course, it is just what the real elites ordered.
Robert Sentner
11:33 am on Sunday, June 10, 2012
It's not a tax problem its and expense problem, until we reorganize DEP and EPA, Pension funds, wasteful tax spending, corporate tax loop holes, stupid projects like the NIZ, etc. etc. changing the funding does nothing, just like Craig Anthony says. I do agree it would make living in your house easier until they decide to start taxing your vegtable garden in your backyard because you can't afford to buy food in the stores. We are so screwed.
Concerned Citizen
12:52 pm on Sunday, June 10, 2012
Mr. Sentner is right!!!!!!!!!! Why not cut expenses at the state level? Lay off a few bodies who are non-productive, and just taking up space. And stop funding things like the NIZ!!! Giving millions of my tax dollars to a private enterprise is all wrong!!! If the state would keep their tax money instead of giving it away to useless causes, there would be less needed. If private enterprise wants to do something, that is fine, but do not look to me for funding by taking my state taxes to fund their projects. Get private funding just like everyone else!!
Lenny
2:29 pm on Sunday, June 10, 2012
Those who think that 1776 is a good idea better think a little bit more before supporting it. Here are a few things to think about:
-The distribution of tax money going to the schools is going to be controlled at the state level. If we get another governor like Ed Rendell, you are going to see the money from the suburbs and rural districts being funneled into Philadelphia (Didn't their district just declare bankruptcy?)
-Would they propose an idea like this to save us money? Of course not. They are doing this to get more money from us, just in a different form.
-This is going to hurt those from the lower income classes. Many people think that people who rent do not pay property taxes, but they do-just not directly. The landlord's tax bill gets passed onto the renters, and you know that the rent bill is not going to drop if this passes, but instead renters are now going to get double taxed.
-The current system is a predictable source of renevue for the schools. By changing it to a sales based system, the amount of tax revenue is now unpredictable. Should the economy get better, the state is going to spend away, and when the next recession hits, guess what? Rates are going to be hiked.
-Saving seniors money? If they a renting or if they no longer live in their home, they are going to be paying MORE because they still buy goods. Instead, find a way to save them on their heating bills, a season's worth of oil will easily run more that double that of a tax bill.
More...
Edwin Feuerstein, Jr.
11:52 pm on Sunday, June 10, 2012
Seniors would definitely save because they pay no state income tax on social security, pensions, 401K withdrawals or IRA withdrawals (most, if not all of their income). They would only pay sales tax, if they spend their money. If they rent, their landlord wouldn't have to pay property tax, but would only pay tax on his profit over expenses, probably resulting in lower rent or smaller increases.
Michael Carcel
2:35 pm on Sunday, June 10, 2012
No way should 10,000 people be losing their homes because of school / property taxes. I has been too easy for local governments, the economy has been good so need more, just raise taxes. Now reality in setting in, you can kick 10,000 people out of their homes but with this bad economy now there is no one to take thier place, emply house = no taxes. What to do? What to do?
Lenny
2:46 pm on Sunday, June 10, 2012
Those same people who are losing thier houses will still pay, but the money will come from rent as opposed to property tax. And now they will pay more taxes on the good they buy, so is there really going to be less money coming from them? No, they are going to pay more. Home heating oil and repairs have cost more people money than school taxes.
This new method is going to make it mush easier for the state to raise sales tax to close a deficit. In the long run, if this goes through we will be paying more for everything. Unless that is, you live close to Delaware where they have no sales tax and will be doing all of your shopping over there as opposed to supporting Pennsylvania businesses.
Robert Sentner
3:37 pm on Sunday, June 10, 2012
trust me they will still get there tax money. empty house or not.
Lenny
2:37 pm on Sunday, June 10, 2012
...
-What makes you think that the state won't take the money they bring in from this plan and spend it on their pet projects, depriving our children of a quality education (Like how the Fed takes Social Security money and use it elsewhere?)
-People complain that those who don't have kids have to pay for kids they don't have. But aren't these the same people who are beneficiaries of an education system paid for by our taxes? Using their logic, I should't have to pay for welfare or social Security because I never collected from it.
-Under this plan, businesses are not going to have to pay for school taxes anymore, so where is that money going to come from that they once paid? Same for landlords.
So be wary of supporting 1776, it's going to be making a deal with the devil.
truth seeker
3:41 pm on Sunday, June 10, 2012
Good point Lenny. How many people who argue that they should not have to pay taxes for school are collecting social security, medicare, or a government susidized health care plan? Even people that hate public education should at least understand that a strong local public school gives their property value. Kill the quality and your home value sinks.
bill frome
4:05 pm on Sunday, June 10, 2012
So is that why Easton homes are worthless????
Lenny
8:08 pm on Sunday, June 10, 2012
"Even people that hate public education should at least understand that a strong local public school gives their property value. Kill the quality and your home value sinks"
You are right about that. Many people choose the location of their homes based on the school district in which the home is located. If this were to go through, eventually there could be less money coming into the better districts and good money thrown after bad into poorly mismanaged districts. The result of this, is that after awhile the homes in the more desirable districts are going to lose value and the ones in the not so desirable districts are not going to be any better.
There are so many people that think that this is the best thing since sliced bread, and it is quite the opposite. People need to learn what is really going to happen if this bill passes.
bill frome
4:03 pm on Sunday, June 10, 2012
No. Until we reign in spending and refrom the school system nothing we do will help.
Lenny
8:01 pm on Sunday, June 10, 2012
That would do more than any type of reform.
bill frome
10:44 am on Monday, June 11, 2012
Wrong lenny it will only encourage the school districts to spend more thus raising having to raise taxes in the future again and again.
truth seeker
5:10 pm on Sunday, June 10, 2012
Ever look at the homes out in Plamer Twsp. and some of the other municipalities in the district? It's a different story. Also, Easton is not the only school district in the Valley. I do think that Easton has suffered from some bad leadership over the years. Don't over generalize.
bill frome
10:46 am on Monday, June 11, 2012
Truth Seeker This is the Easton Patch. We talk about news involving Easton. I suggest you go blog on the Patch for your town.
Edwin Feuerstein, Jr.
11:39 pm on Sunday, June 10, 2012
Going from a local property tax system to a state wide sales/income tax has several benefits if it has proper controls so that prejudice and politics are removed from the amounts each school district receives. Giving local districts funds based only on per student day attended would give each district equal financing. It would encourage school boards to make the most of the money they got, encourage programs to minimize truancy and to negotiate reasonable wages, benefits and pensions for school district employees.
Currently, school boards come up with what they are going to spend and stick property owners with higher taxes to cover their lack of spending control. If they raise taxes significantly, businesses and associated jobs will leave, forcing home owners to pay more. My current school tax is more than double what the total of school, city and county taxes were when I bought my house, but my income is half of what it was 10 years ago.
The property tax system has no controls put in place to adjust for economic situations. When there is a downturn in the economy as there is now, those that continue to work have the ability to pay property taxes, but if you retire, have a lower paying job or lose a job, your taxes continue to rise even though you have fewer funds available. A family that has paid off their mortgage and no longer owe on their house, may lose their home because property taxes continue to rise uncontrollably.
Edwin Feuerstein, Jr.
11:41 pm on Sunday, June 10, 2012
By having an education system that is based on sales tax and income tax revenue, people on fixed incomes and those who lose their jobs or end up working for a lower wage, will not see higher taxes and may pay lower taxes if they have to reduce spending. Those that are working and receiving higher wages, bonuses, over time payments, etc. will have more to spend, and although none of us likes to pay higher taxes, they would be in a position to pay more without losing any buying power. As a person’s income rose and fell, his school tax would be adjusted accordingly.
If the law is properly written so that prejudice and politics are removed from the amounts each school district receives, a sales tax and income tax would be more responsive to individuals financial conditions and would allow homeowners with financial setbacks to have a better chance at keeping their homes.
Without their ability to increase their income on a whim, It would also require school boards to use imagination and ingenuity to fund programs that are productive rather than just fluff.
truth seeker
5:35 am on Monday, June 11, 2012
I respect what you are saying about the taxes. I think school districts have tried very hard to reign in spending and what they offer is not fluff. What would help is the state cutting back on unfunded mandates.
LMTnative
8:20 am on Monday, June 11, 2012
I continue to live in East Penn mainly because of the quality of the education my children receive. However if the state and school board continue to underfund the schools and allow class sizes to rise I may have to rethink that decision. My main problem with the bill is we are taking away location control of our tax dollars and giving it to the State. As time has proven they will funnel my tax dollars to the big urban areas and suburban areas like East Penn will get screwed. For the past two years Tea Bag Tom has proven he doesn’t care about the future of our state by cutting funding for education, reducing the number of teachers, and raising class sizes. If this bill passes we will have a lot more of the same and ultimately less educated children to enter our workforce.
ted.dobracki
8:42 am on Monday, June 11, 2012
LMTnative makes a good point about giving up local control over our tax dollars. Some income redistribution is a good thing, in order to give kids in poorer areas of the state a chance to get a good education. This means that some areas get more return from state tax dollars than EPSD, and conversely EPSD, which is deemed to be wealthy gets much less than the average. Lobbying for more state money will hurt EPSD's taxpayers far more than it will help them. To wit:
1) EPSD gets only half of the average in return of state income tax to its school. In PA, the total support for public education is essentially equal to the total personal income tax. However, EPSD taxpayers pay almost $50 million for state personal income tax while EPSD gets barely $20 million back from the state. Asking for more from the state may get EPSD more, but it will cost EPSD's taxpayers twice as much!
2) The same is true for the gambling for property tax rebate. Compared to the average in the state, EPSD's return is about half of the average.
There may be some indirect social benefits from this revenue sharing, but the direct financial result of increasing state funding will be to hurt EPSD taxpayers.
Robert Sentner
8:08 am on Monday, June 11, 2012
how about lets can a nadle on unfunded mandates, PENSIONS, tenure, and over development. Lets try doing that first. then everything else should fal;l back into place.
Jim Bayles
9:40 am on Monday, June 11, 2012
more practical to reduce the property tax 50% and increase state income tax and sales tax accordingly.
Andrew Wilt
10:20 am on Monday, June 11, 2012
The existing property assessment system is fatally flawed because although it is very clear, and laid out in excruciating detail, how assessments are supposed to be done, there is no law requiring that assessments be performed at all. Reassessments are totally up to the whims of county councils. Unless properties are reassessed frequently, even every year as is done in some other states, the assessments of properties with lower than average fair market values tend to be proportionally higher than they should be. This same statistical tendency, over time, causes the assessments of higher than average fair market value properties to be lower than they should be. Therefore the wealthy, as usual, are not paying their fair share. If you want to read more, please to go my site - http://www.thecommonman.com/ - and read why the very expensive properties are assessed at far lower percentages than average properties.
If high end properties were properly assessed, there would be a significant increase in revenues.
Joshua Vincent
11:04 am on Monday, June 11, 2012
How can any tax be more regressive than the sales tax? How can any income tax be less regressive than the flat income tax Pennsylvania imposes? The sales tax rate does not compute, as it will tax services and goods that people will border hop to procure. Delaware’s 0% sales tax anyone?
HB 1776 also lets bigger businesses off the hook, while shifting tax incidence to small business (beauty parlors, restaurants, funeral homes, accountants, etc. that can’t escape the new sales and use subjects of tax.
If school expenses are too high, then cut expenses. What tax is used is not as relevant as the expense side.
Moving to sales and income taxes would unfairly burden the poor, the elderly, and working families just starting out. If property taxes are so bad, why do states that use it more than other taxes do so well economically (Texas, New Hampshire, Virginia, etc.) . The property tax can be fixed not dumped, and anti-capital measures like sales and income taxes avoided.
Granting the State of Pennsylvania decision making powers over local decisions is not the way to go; I am surprised that supposed free-market advocates want to tax people’s work and capital, and at the state level at that. I wrote a longer piece on the subject: http://www.urbantoolsconsult.org/blog/2012/04/20/Eliminating-the-property-tax-It-must-not-happen-but-well-see-what-happens.aspx
louis kootsares
12:48 pm on Monday, June 11, 2012
yes eliminate property school tax that is the first step we need to also eliminate high priced school administrators overstaffed no more tenure drug testing mandatory merge school districts watch every move that goes on no more apathy use lottery money for school funding along with an increased sales tax along with changes we have to elect politicians who work for us and not themselves there appears to be too many self serving people in office ergo government for the people and by the people if nothing else works no more free education charge the users
Liberalism is a mental disorder
4:00 pm on Monday, June 11, 2012
Does you keyboard have a "." on it ??
Liberalism is a mental disorder
3:59 pm on Monday, June 11, 2012
Come up with all regressive forms of taxes. Then all the poor people and unemployed will move to NY and NJ. That's the solution for Pa.
Jim Gregory
4:29 pm on Monday, June 11, 2012
Right, all the seniors who fought and died in WW2 and are now living on a pathetically low social security income would be pushed out with the rest if we continue with regressive forms of taxations. Most of the poor and unemployed are living in apartments already..The ones hurt if there is no reform will be the working poor and seniors..Reform is overdue and necessary..Shocked to see that a Republican is actually considering it..
Jim Gregory
4:30 pm on Monday, June 11, 2012
lol..Obviously not those who died but those who fought..
mike schlicher
11:34 pm on Tuesday, June 12, 2012
That first reader needs some meds or mabe some legal weed because he's out there.Ive seen the homes of seniors and financialy strapped people taken from them long enough.I for one am out of work because of a disability and I worked till I cant work no more but Taking our homes because of the ability to pay school/property tax is gone on for too too long .I am not asking for a hand out just some relief enough is enough you keep taking and taking again til there is no more left .My wife and I pay our bills on time and like most people we grumble about it but we do it.Now to get a break wow this is hard to believe especially coming from a republican.I think it's about time EVERYBODY pays there fair share NOT just the HOMEOWNERS.Think about it people all of the freeloaders having to pay the same as me.WOW what a concept.Now all we have to do is look at WELFARE and all will be well.I know thats alot to ask for but one can hope cant he?
Jim Gregory
8:51 am on Wednesday, June 13, 2012
Exactly Mike..Property tax reform is long overdue in pennsylvania. So many people are struggling to pay these taxes after working hard their entire life. Now you have the governor's education cuts which puts more pressure on school districts to raise their taxes.. It has to stop. I'll gladly pay more state income taxes and sales taxes so I dont have to worry about losing my home when I retire or if I am laid off of work..Tax reform is so overdue...Just get it done already!!!
louis kootsares
2:03 pm on Thursday, June 14, 2012
we need school tax reform i can see why our educators would not want it .. the same reason al capone disliked elliot ness and jessee james did not want any lawmen around when he visited a bank , now these parasites have the schoolboards in their back pockets stacked with ex teachers and boo hoo liberals they are overpaid over staffed and always wanting more with the state controlling things haha the golden goose meaning us poor tax payers is dead hurrah let the gifted ones laid off get a real job
Jim Gregory
3:58 pm on Thursday, June 14, 2012
Have no idea what you are talking about louis but it's not a boo hoo liberal that's causing our school taxes to go up..His name is Tom Corbett..He's our governor..As long as he continues to pass along education costs to our local districts, school taxes will continue to climb..Since many of us, especially seniors on fixed incomes, cannot afford that, we desperately need tax reform..