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Politically Uncorrected: RIP: The School Property Tax

property-taxes1Governors propose and legislatures dispose.

That particular political adage could be one that Tom Wolf, the Democratic governor of Pennsylvania, might ponder as he begins the likely lengthy process of steering his budget and tax proposals through the state’s Republican dominated legislature.

Wolf’s budget proposes major tax restructuring designed to reduce Pennsylvania’s property tax burden by 50 percent on the average taxpayer.  But if 50 percent, why not 100 percent-why settle for half a loaf?  Why not get rid of the property tax for school funding altogether?

Is it a radical idea, an extreme idea, an unrealistic idea?

Actually, no!

Many legislative Republicans would like to do so, and Wolf is certainly moving in that direction. Pennsylvanians widely favor it as well.

Moreover, the argument for abolishing the property tax as a source of public school funding is compelling. Doing so would comprise one of those rare moments in government where officials have the opportunity to do something that is not only good politics, but also good policy and good economics.

Pennsylvania’s property tax, like property taxes in many other states, is a fossilized artifact from the 19th century that faltered badly in the 20th century and failed spectacularly into the 21st century.

There is not much good to say about it – and few do so. Economists and public finance experts have produced entire libraries documenting the foibles of the property tax. It’s a very long list.

   FAIRNESS – the property tax is regressive, unfairly falling on seniors and others with fixed incomes or less means to pay it.

   COST- the property tax is enormously expensive for government to collect compared to modern “broad based” taxes like income or sales.

   EFFICIENCY – the property tax is “inelastic;” economist speak for a tax that fails to raise enough revenue to pay the bills.

   COMPLEXITY – the property tax is unreasonably complex, relying on arcane metrics like “millage” and wildly disparate valuations that make it byzantine and baffling to taxpayers.

   UNPOPULAR– finally, the property tax is repugnant to most taxpayers, deeply resented and widely unpopular.

U. S. Secretary of Education Arne Duncan recently revealed that: “The state of Pennsylvania is 50th, dead last, in terms of the inequality between how wealthy school districts are funded and poor districts.” Pennsylvania is the worst of the 50 states in achieving equal funding among its 500 districts. This embarrassing outcome, prejudicial to poorer school districts, is mostly the result of using the property tax to fund education.

Among all the major taxes Americans pay, including income and sales taxes, property taxes are the worst by any measure used. Taxpayers loathe them; politicians deplore them; economists condemn them.

And this worst and most reviled of taxes is the tax we use to support arguably the most important function of government – education.

This sad state of affairs has gone on too long. Administration after administration going back to Robert Casey and earlier have tried to somehow “reform” the property tax, to make it fairer and more efficient. All of these efforts have ended badly.

Now in the 21st century, talking about “reforming” the 19th century property tax really is just rearranging the deck chairs on the Titanic long after the iceberg has been hit.
The property tax cannot be reformed – but it can be abolished.

And now, Governor Wolf and the GOP legislative majority have an opportunity to do just that – abolish the property tax for school funding completely. In the recent past Republicans in both the House and Senate have introduced legislation that would do the job.

But make no mistake about it – Pennsylvania’s 500 school districts need a predictable, reliable, and fairly distributed source of funding – and abolishing the property tax means that funding must be shifted to broad- based state taxes like income and sales. In addition, the school districts should retain some strictly local sources of funding to avoid total dependence on state funding.

Getting a left-of-center Democratic administration to an agreement with a well right-of-center Republican legislature will not be easy. It will require leadership, vision and political courage – not qualities always seen in state politics. But the stakes are high and the opportunity is rare.

Both sides really want the same thing here – a sane tax system in support of a stable revenue source for schools. Realizing that comity of interest is half the journey.
Getting rid of the property tax means Wolf wins, the GOP wins – and most important of all, the long-suffering taxpayers of Pennsylvania win.

It doesn’t get better than that.

8 Responses

  1. Can we count on Republicans actually funding public education?
    Look what has happened in Kansas under Sam Brownback, Wisconsin under Scott Walker and Louisiana under Bobby Jindal.
    These governors severely slashed education to the bone, and these states have suffered from GOP ideological budgeting cuts and diverting state funds for private schools.
    Nationally, you can see both State and US House and Senate Republicans have little use for education and want to steer funds to privatize it, often to crony donors.
    These facts are easily sourced through a casual google.

  2. You hear the catchphrase “it’s for the children” as a justification to raise school property taxes. I would offer a different view of that catchphrase – eliminating school property taxes is “for the children”. It is proven that arguments over finances are a key factor in divorce rates. Obviously this affects the family. But the children are the “collateral damage” of the arguments that take place between adults. I’m sure constant and unrelenting increases in school property taxes are included in many of those arguments. Up to 10,000 families are “evicted” from their homes annually in PA due to non-payment of school property taxes.

  3. Eliminating the school property tax by passing HB/SB76 has received bipartisan support in the Senate 13 Dem and 13 Rep. I think property tax elimination has a much better chance of passing than the Wolf plan does. If the polls over the last few years are any indication, the people overwhelmingly want elimination and are sick and tired of “relief” schemes which will wind up costing them even more then they pay now.

  4. A good article except for one important point. “This emarassing outcome (the fact that Pennsylvania ranks dead last in equitable funding for public schools” is mostly the result of using the property tax to fund schools.” That statement is wrong. While there are numerous arguments that can be made for and against property taxes, this is not one. The inequity in school finance is due tot he failure of the state to pay its fair share of the costs of public education. Per the state constitution, the state is to provide a “thorough and efficient” system of public education ensuring equal opportunity. The role of state funding is to address the imbalance between the differences in local districts and their ability to generate revenues locally. Historically that meant that statewide the Commonwealth would pay half of the costs of public education but distributing those funds based on the ability or more accurately the inability of school districts to generate local revenues. But for well over 20 years, the state has not used a reasonable system of distributing this aid and at the same time, has seen the state share of funding has dropped to around 30%. School districts across the state are essentially being paid based on what they received from the state in 1991–regardless of what has happened in that district in terms of student population and its local economy.

    Has that place pressure on local property taxes. Absolutely. Is the property tax system repsonsible for the inequities in school funding–for the disparities between what distrcits are spending on instruction. It’s hard to make that case.

    This is a good article otherwise.

  5. Education should be funded by ALL Citizens of PA so in my mind a broad based tax is the way to go, along with income tax.The problem lies with the process…to collect and pay in to Harrisburg, and expect that the politicians allot the ideal amounts to fund Education ignoring their own interests, not going to happen. If broadening the taxable base, the monies Must be Dedicated to ELIMINATING PROPERTY TAXES…ONLY THEN CAN WE BE ASSURED THAT THE TAX MONIES ARE BEING USED PROPERLY!

  6. Taxpayers who do not have children were once children themselves – and benefited greatly from a free, public education. They shouldn’t begrudge a bit of paying back into the system. Shifting to a graduated income tax would lift some of the burden off those who are on limited income and place it on those who are earning higher wages.

  7. Yes, the real estate tax is an archaic method of supporting schools, but what alternative? The state’s income tax and sales taxes are flat assessments that unfairly place the burden on low-income residents. What “strictly local sources of funding” do you recommend? That’s another open-ended recipe for a rich-get-richer approach to education. Best option? a graduated income tax and special assessment on industries, which benefit the most from successful education by hiring qualified, intelligent employees.

  8. I agree that property taxes are a burden on the tax payer. I would suggest that tax payers that do not have children in school would be exempt from real estate taxes. Especially senior citizens who are on a limited income . I hear complaints from seniors that they don’t know how to live in this world.

    Thank you,

    Donna Bernheisel

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