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House Bill May Cause Tax Shift for Schools

A new bill may be the answer to increasing property taxes that have, over time, been contributing to more and more public school revenue. The bill would shift the tax burden to income and sales taxes, along with slot machine taxes.

Proposed House Bill 1776, called the “Property Tax Independence Act,” would eliminate property taxes as a source for public education funding in Pennsylvania.

The bill, sponsored by Rep. Jim Cox (R-Berks), calls for increases in income taxes and sales taxes as alternative means of revenue.

The income tax rate (now at 3.07 percent) would increase to 4 percent, while sales taxes would jump 1 point from 6 to 7 percent (and to 8 percent in Allegheny County, where the sales tax is already 7 percent).

In addition, a sales-tax exemption on many goods and services would be eliminated, such as on dry cleaning, funeral expenses, amusement parks, gum and candy, flags, magazines and newspapers.

Cox estimated in a Post-Gazette interview that all of these measures would generate $9.6 billion, coming close to the $10 billion needed to make up for a property-tax revenue loss.

The remaining money would come from existing slot machine revenue taxes, he said.

Cox drafted the bill with the intention of protecting homeowners from debilitating property taxes, he said.

“No tax should have the power to leave you homeless. We have to end the practice of kicking senior citizens and widows out of their homes because they cannot afford to pay their property taxes.”

According to David Baldinger, head of the Pennsylvania Taxpayers Cyber Coalition, more than 10,000 Pennsylvania families lose their homes each year because of unaffordable property taxes.

In the past, proposals to fundamentally change the tax structure have been voted down, including a 1988 referendum to get rid of property taxes by raising other taxes.

For this reason, representatives on both sides of the party line are hesitant about the recently proposed tax shift.

The Pennsylvania School Boards Association said that they do not support the complete elimination of school property taxes, but support diversified means of taxation.

Guest commentary appearing on PoliticsPA today discusses the need for a replacement to the current property tax system.

Tumultuous economic times have already been cruel to public education, and have left many wondering how school budgets will be impacted if the proposed restructuring of the tax system passes.

May 29th, 2012 | Posted in Front Page Stories, Harrisburg, Top Stories | 32 Comments

32 thoughts on “House Bill May Cause Tax Shift for Schools”

  1. john Michael says:

    Funny how some people just don’t seem to get it. The number one priority here is SECURITY OF PROPERTY OWNERSHIP. Its not about paying more or less in life, expenses can always be controlled, prices go up and down. The important thing is the ability to keep real estate free and clear. Somewhere to rest, we dont always have to concern and worry. Everyone under their own vine and fig tree. Property is Life!

  2. Mike says:

    People get blinded by taxes and do not see the real problem. Shifting taxes is great so people are no longer threatened to loose their home due to high property taxes, but the root cause of high taxes is waste at all levels, local, school districts, state and federal. Lucrative promised pensions and healthcare being the worst offender. How can you promises a monetary amount to someone 20 to 30 years later when your returns are based on a static percentage and never consider a long term bad market returning 2-3 percent. Collective bargaining allows people to work as much or as little as they want and still get a contractual raise the same as everyone else in the same union. The average salary for a teacher is 62K in our school district and the librarian makes 85K. Everything is out of control and I figure with my property tax increasing every year at 3%, my property taxes will be around 9K when I try to retire. Just take my house now! Anyone opposed does not own a house because they are not threatened every year to have it taken from them. Taxes are high because of wasteful spending, political greed, union greed, and unfunded promises. Shifting taxes is only one part the solution.

  3. A. George says:

    I think this is a fantastic idea. For those who think that it’s not fair to working class? *I* am working class. Another year like these past 3-4, and I will probably lose my home because I can’t afford the taxes. It was really tough to get it together this past year. I can’t imagine where I’ll get it next year, especially with the recent increase in assessments.

    GO House Bill 1776! I will gladly pay a 1 – 2% increase in both sales and income tax.

    I think the only ones who are against this are those who don’t own a home. Maybe owning a home isn’t high on your priority list, but it is to lots of other people. And why should we be penalized for this?

    GO House Bill 1776. Oh! I already said that. Sorry. 🙂

  4. Pat Williams says:

    It’s time to take the burden off homeowners!!! If they pass this bill everyone will contribute,homeowners,renters welfare,drug dealers,rich and poor. Our school and property taxes are $8000.00 a year and we are on social security. That”s $667.00 a month on a $1000.00 a month s.s. check.. YOU DO THE MATH!!!That 1% more would not hurt senior citazens!! They could afford to eat and go to the doctor when needed,, WHY DOESN”T ANYONE LOOK AT THE WHOLE PICTURE?

  5. Lisa says:

    I just read an article in the Reading Eagle where the Daniel Boone School District in Birdsboro, PA is studying converting the current cafeteria into a student union which would offer “light snacks and possibly a coffee bar for students.” An old cafeteria would be renovated to accomodate fewer lunch seatings because it is larger. While the whole idea is being floated in order to save money, I have to question why there was a need for building the current cafeteria in a school annex at all. The old cafeteria, which is currently being used for students to “lounge”, should have been used all along for lunch seatings instead of wasting taxpayers’ money on a new one that now is being studied for use as a student union with A COFFEE BAR! Cut me a break. This is why I get so angry about having to scrape together the $5000 a year to pay my property taxes while school districts like this one are contemplating building COFFEE BARS. Eliminate the school property tax and hold school districts accountable for their spending!

  6. Rick O'Shea says:

    Would 3 million PA homeowners spend a portion of their school property tax (if eliminated) at local businesses? Of course. Would eliminating $300-$800 per month from a mortgage stimulate home buying? Yes. Would ending school tax on homes occupied by retired seniors living on SS allow them a higher quality of life in their old age? Sure. The benefits of HB1776 outweigh negatives by 90% to 10%. Those who oppose it have a direct financial stake in the status quo. There is no other possible logical explanation.

  7. Carol Ann says:

    Oh, I mean, every property owner in these United States of America !! http://www.ptcc.us

  8. Carol Ann says:

    Obviously, all the abatements, rebates, reductions, exemptions, etc. are just thrown at New Yorkers like so many crumbs to keep you quiet. .. Here’s why and how-to eliminate the School Property Tax altogether, once and for all – http://www.ptcc.us

  9. carol deangelis says:

    This bill would certainly help the seniors who would prefer to stay in their own home. It now takes two social security checks and a small pension check just to pay the school tax. A sales tax would be better since it would not bankrupt the seniors as they don’t have the money to make purchases. It takes all their income to pay utilities, groceries, gas, prescriptions and medical insurance. Someone needs to give them a break before they all lose their homes.

  10. Shaun says:

    Taxes are needed to fund our public schools, but to append the school tax to the responsibility of owning a home is not the answer. The idea of possibly loosing your home due to having a burden of a 4 to 5k school tax while living on a fixed income or retirement is a burden no pa resident should have. What incentive do public schools have to spend the pa citizens tax more wisely,when the tax revenue continues to be paid whether you have a job or not that enables you to pay those taxes. More of the burden should be placed on the idea that if the state NEEDS more funds for schools, it needs to spur economic growth in the state that spurs more PA citizens that can pay into the PA tax system. Stop using the State threat of loosing your home if school taxes are not paid.

  11. Richard Osswald says:

    House Bill 1776 is a ruse that will do one thing, create a cash windfall for landlords, slumlords, big box stores, and other commercial properties, while raising taxes (sales) for those that can least afford to pay.

    It’s disheartening to see people that are elected to represent the people of PA support a measure that they must know will negatively effect the great majority of their constituents.

  12. Paula Arnold says:

    It’s about time we get rid of the school taxes. An increase in sales tax is a fair way. Renters who have children will now contribute to their children’s education. If you spend $100 at Walmart the increase in tax is $1. I’m certainly willing. The eic would increase less than 0.1%. In return my school tax is gone
    .This is fabulous. I hope they work out the details and get this passed.

  13. lee mosley says:

    I think our senior citizen home owners have paid enough. If this could help keep them in their home and from being stressed, pass it.

  14. J T says:

    This is a wonderful bill if passed. My county is currently going though a horrible property tax reassessment.It seems because most of the farms around my area are under “clean and green” tax relief that all us poor little land owners are getting to make up the difference. What a mess this has been!!! For the first time I am awakened to just how ridiculous using property taxes to support local school districts really is. This bill makes sense and is more fair for everyone. Nobody likes to see their taxes go up, but its really not that much when “equally distributed”(sorry to use a democratic phrase) among everyone including all non property owners who send their children to public school. And doesn’t this also allow all of the supposedly rich land and property owners to then actually spend some of their extra money on the local economy? Isn’t that what would go to more of the 7% sales tax anyway? So, I am trying to figure out why this bill hasn’t passed yesterday?????? We might as well go to it if everything else is going to be “equally distributed.”

  15. Alan says:

    Anyone who worked to bring Proposed House Bill 1776 this far is surely to be commended. It probably won’t pass, and here’s why: It’s too sudden, and it’s too Draconian. Don’t give up! WHEN (not “if”) it’s defeated, go back to the drawing board, and rework the Bill to be phased in. In other words, start by GRADUALLY replacing property taxes, so that your bill, which is an excellent one, can be implemented over a period of years, thereby allowing ample time for problems to be met and worked out, when they arise … OVER TIME. I do believe both sides of the political aisle would be more receptive to such an idea, and in so doing, you’re setting the stage for bipartisan collaboration. “CHANGE … IS NOT AN EVENT … BUT A PROCESS.”

  16. ERIC says:

    Not sure you realize the “corporate” property owners do not pay property taxes for rental properties – you do in your rents. Rents will go down through competition. Besides we aren’t talking about companies the size of GE (who doesn’t pay taxes) – mostly its people like you and me trying to make a few extra bucks. A sales tax will hit more wealthy people harder because they buy more (obviously) and Grandma doesn’t have to worry about the tax man taking her home for $1000 in unpaid taxes.

  17. andy says:

    A few points:
    This bill will not completely eliminate property tax, now nor ever in the future. (By my current understanding)
    Local municipality and county property tax will continue, so to say a 90% (or 100%)decrease is possible seems false, based on my taxes where those 2 items comprise around 20% of the total.

    But at this point I support the bill, I would like to see change.
    Maybe I’m selfish, but we have a farm and pay $17,000 annually, and, that comes right out of my income just like the rest of you. In a bad year we are left with nothing, sometimes borrowing money to stay in business and keep food on our table. In the good years we pay off the bills and hopefully make progress on paying down our debts.
    It’s somewhat oppressive.

  18. david kcuzborski says:

    School tax; the most unfair EVER.

  19. Chris K says:

    Simply put this would eliminate stupid spending like a new 2 million dollar football field for a school with less than 1000 students. The school board votes and the homeowners and businesses pay for it without a say. This being said no new projects could be started without winning a popular vote of the district. I know there are haters saying this is about helping the rich guy, ya know I go to work everyday and live paycheck to paycheck to get my bills paid. Would an average savings of over $2000 a year make a difference in my life you bet it would. Stop hating everyone and lets just make the taxes more fair for everyone and please stop harping about the poor working man because I am one and I want this bill passed

  20. PAPol says:

    Jeff, the school districts can keep only the amount of property tax necessary to meet debt payments that were on their books as of December 31, 2011, so they can’t load up on debt in anticipation of passage of the legislation.

    For the majority of Pennsylvania school districts debt service is less than ten percent of their total budget. This means that almost all Pennsylvania homeowners will see an immediate property tax reduction of ninety percent or better until the existing debt is satisfied, then the remainder of the property tax will disappear completely. There are 23 districts in the state with no long term debt and their property tax will be eliminated immediately.

    Previous property tax elimination plans called for servicing existing debt from the state level but many taxpayers from frugal school districts rightfully objected to paying for debt incurred by high-spending districts. Requiring each school district to service its own debt is by far the fairest method to address this issue while still promptly allowing almost total school property tax elimination.

  21. PAPol says:

    Yep, Sean Ryan, the PTCC and PCTA – all 72 grassroots taxpayer groups that comprise the coalition and the tens of thousands of supporters who have studied HB 1776 are morons and are full of cr#p, just as you assert. /end sarcasm

    Where do people like you get the nerve to make such statements when you know nothing? Get a grip and learn the facts or keep your meaningless opinions to yourself.

  22. Jeff says:

    I like the idea but my one concern is that the property taxes would seem to remain for districts with current debt until it is paid off. Does that mean that this debt payment can be stretched out over the next 20 or 30 years? Will that be an incentive for all districs to load up with debt so they can keep collecting taxes so that no one in the state will feel a benefit for decades? I hope they address that if it ever gets debated.

  23. Tim says:

    We are all paying now, this is not the answer. Governor Corbett has taken a back seat in this debate, as usual, and has no solutions to the problem. Just hold the line on education spending and cutting capital projects just pushes off more liability to our children and grandchildren. We need a leader in the Governors office not a caretaker.
    PS I am sure he will be taking his cola increase for the next 3 years!

  24. Jeffrey says:

    Everyone should contribute to public schools.

  25. sean ryan says:

    This is a trash bill that penalizes the working families in PA while letting the corporate property owners recieve a tax break. They do not pay personal income tax and they do not pay Sales tax in many cases. So while working families have to fight the inflation of consumption taxes with lower take home pay, the corporations will be getting a tax break.

    HB1776 is trash and will not eliminate the school property tax. the PTCC is full of cr#p.

  26. C. Miller says:

    To Matt Miles: My annual school tax bill is nearly $5000. If my grocery bill goes up $20 a month, then I am only spending $240 a year. I don’t think the average person buys a used car every year, so if you average the tax paid on the car over the period you own it, it is minor compared to the amount of property taxes the average home owner pays annually. People are being forced out of their homes because of taxes. This will work; it will be different and there may be a few lessons learned early on, but it is the fairest way to support our public schools.

  27. Paul Williams says:

    The elimination of school property taxes is long overdue! Property owners have been bearing the brunt of school funding and it is time for others to pay also. There are many with several children in school who pay next to nothing.
    The school property tax is antiquated.

  28. We keep being told that 10,000 Pennsylvania lose their homes each year over TAXES (not foreclosures and bad mortgages or absentees that walk away from burned out shells). In Delaware County, there are currently 104 properties up for tax sale, of which 16% were owned by LLCs. 10K is an assertion, and I’d like to see documentation.

    If expenses are too high, then cut expenses. 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 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

  29. Matt Miles says:

    This is the most regressive way to tax as possible. the PTCC is a joke. My already high grocery bills go up another $20 per month, the purchase of a modest used car goes up another $100-$200 yet airplanes and parts still remain tax free, and clothes now are taxed. Wake up, people. More Republican-sponsored breaks for them and greater taxing on the backs of the working class.

  30. Taxpayer says:

    While this may ba a start, it is a Tax SHIFT not a TAX Cut. What is going to be done to cut the cost of School Districts? Are we treating the symtom rather than the illness?

  31. PAPol says:

    John, it is no such thing. I would bet that your Representative is one of those who opposes the measure and will say anything to discredit it.

    This legislation was developed in concert with the Pennsylvania Coalition of Taxpayer Associations (PCTA), an affiliation of 72 grassroots taxpayer groups from across the state that acts as a citizen watchdog. From the earliest discussions of this legislation in November 2010, the PCTA has been a full partner in the drafting of the Property Tax Independence Act. House Bill 1776 is truly a collaborative effort between lawmakers and the taxpayers who support it and, because of this collaboration, has gained widespread acceptance by residents from across the Commonwealth.

    Full details, including the supposed “special services” tax are available on the PTCC website at http://www.ptcc.us. Please take the time to learn about the legislation before blindly condemning it.

  32. John in Montco says:

    Has anyone read the bill? I’m a Republican, and in constant contact with my local state Rep. I was told explicitly that the bill would NOT do away with taxes levied by the school districts completely. There would still be a provision that would allow the school district to impose a tax for “special services” funding. None of that is clarified by the way. This bill is a HUGE smokescreen.

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