Tax Relief

Pennsylvania householders want property tax relief

Attempts have been made for decades to change the way schools are funded. Pennsylvania collects approximately 64% of school funding from real estate owners. This is one of the highest, if not the highest percentage in the nation. Real estate owners are therefore a heavily discriminated class as they are forced to shoulder most of the burden of funding schools.

A far fairer and more equitable path is to move to a funding model at the state level. Many proposals were made in Senate Law 76, the best known of the bills. SB 76 would have increased the state sales tax from 6% to 7% and expanded the tax base. Additionally, income tax (PIT) would have increased from 3.07% to 4.34% to 4.95% by the time the final financial analysis was done.

In fact, everyone in the state would pay the same rate to fund schools. Think of it like a flat tax. What can be fairer? The bill has the added benefit of collecting revenue from non-state residents on every taxable item purchased.

The current income tax increase proposed by Governor Tom Wolf is in line with what SB 76 would have increased the PIT. The big difference is that there is no elimination on his proposal and an increase in PIT without elimination will effectively undo the elimination effort by removing billions from a major source of funding.

I’m not going to go into all the intricacies of how elimination calculations work. Suffice it to say that the naysayers’ concerns have been raised over and over again. The Pennsylvania Independent Fiscal Office stated that the vast majority of people under SB 76 would win. Perhaps a small percentage of people would lose under an elimination law, but far, far, far less than under the current system, which is nothing more than a system of winners and losers! While he claims that 67% of Pennsylvanians will either get a tax cut or their taxes stay the same, he continues the class struggle that has created a vast system of winners and losers.

From the IFO report:

• Homeowners of working age are realizing a tax cut. The analysis shows that the increase in federal income tax (through lower individual deductions), state income tax and sales tax is more than offset by the reduction in property taxes.

• Retired homeowners enjoy significant tax breaks. The analysis shows that the reduction in property tax slightly offsets an increase in the higher sales tax.

• The abolition of property taxes would significantly reduce the proportion of property taxes and make the Commonwealth more attractive for the location and expansion of the company.

Had Governor Wolf supported the elimination, a bill like SB 76 or a slightly modified version would likely be law. While I’m not saying I support a tax hike to fund schools, just in case he or a governor asked for a tax hike in the future, the tax hike would at least be fair through a sales or income tax financing model. This would spread the burden of the same increase in the sales tax rate across everyone. Instead, it discriminates against a certain class of people.

Daniel Hotchkiss lives in Erie.

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