By Andrew Staub | PA Independent
HARRISBURG, Pa.—Pennsylvania may be on the verge of eliminating most property taxes, which now fund schools.
“We believe that we are closer than ever before to slaying the school district property tax beast,” state Sen. David Argall, R-Schuylkill, said Monday.
The legislation would replace property tax revenue dollar-for-dollar with revenue from an expanded and higher sales tax, as well as money from an increased state income tax. Property taxes needed to pay off school districts’ construction debt would still be charged.
An amendment announced Monday largely makes technical changes to Senate Bill 76 to clarify which goods and services would be subject to the state sales tax.
The legislation would hike the sales tax from 6 percent to 7 percent and expand the products and services that are taxed. The personal income tax would rise from 3.07 percent to 4.34 percent.
Still, bill opponents — including the Pennsylvania Budget and Policy Center and the Pennsylvania Chamber of Business and Industry— argue it would create a volatile funding system for public schools and hurt poor people.
The Budget and Policy Center referenced a report from the state’s Independent Fiscal Office that found the current system would generate $2.6 billion more than SB 76 by 2018-19.
“SB 76, whether in its current form or if amended, would impose a foundational re-organization of the state’s taxation and educational systems, with potentially vast negative consequences for Pennsylvania’s schools, its workers and consumers, and the economy of the commonwealth.”
State Sen. Judy Schwank, D-Berks, said the legislation could force a discussion about an equitable school funding formula, while others said part of the objective is to control spending rather than allowing property taxes to inflate to fund increasing education costs.
David Baldinger is spokesman for the Pennsylvania Coalition of Taxpayer Associations. He cited IFO statistics that found school property taxes have ballooned by 146 percent since 1993-94, while the average weekly wage in Pennsylvania has increased by 80 percent and the Consumer Price Index by 59 percent since 1994.
“Eventually the system’s going to crash and burn,” Baldinger said.
State Sen. John Yudichak, D-Luzerne, already has an example of the problem a reliance on property taxes can foster. A school district he represents lost a large part of its tax base after flooding damaged homes and businesses, he said.
Nobody will argue the property tax is fair, Yudichak said.
“This is about really building a 21st-century education system,” he said.
The bill still needs to make it through the Finance and Appropriations committees before it can go to a floor vote.
The contingent of co-sponsors in the state Senate has remained at 26, and Argall believes holding onto those votes is key in passing the bill there. A strong vote, supporters said, could help push the legislation through the House, which passed a different version of property tax reform last year.
The House bill would give school districts the power to phase out or reduce property taxes through an elimination tax that could include a combination of an earned income tax, business privilege tax and mercantile tax.
There’s another problem.
SB 76 and its companion legislation in the House already came up as an amendment and failed this session. Steve Miskin, press secretary for the House Republican Caucus, has said the chamber’s rules preclude defeated legislation from coming up again in the same session.
Argall isn’t fazed.
“I spent 25 years in the House,” he said. “I refer you to Rule 102. If we have 102 votes, they will get this through the House of Representatives, the rule that has been cited notwithstanding.”
Andrew Staub is a reporter for PA Independent and can be reached at [email protected] Follow @PAIndependent on Twitter for more.