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 GrangePennsylvania Farm Bureauand Pennsylvania Coalition for Taxpayers Associations

The committee is scheduled to vote on the act Monday.

Jim Gregory June 11, 2012 at 08:30 PM
lol..Obviously not those who died but those who fought..
mike schlicher June 13, 2012 at 03:34 AM
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 June 13, 2012 at 12:51 PM
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 June 14, 2012 at 06:03 PM
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 June 14, 2012 at 07:58 PM
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..


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