school finance reform

Abolish School Property Taxes in Pennsylvania by Increasing State Sales Tax to 7%?

Are you tired of paying school property taxes in Pennsylvania?

Would you support legislation that would abolish your school property tax bill by raising the state sales tax to 7 percent? If so, State Rep Jim Cox (R-Berks) has a solution that would replace school property tax funding with new state revenues — House Bill 1776, Property Tax Independence Act.

The proposed Property Tax Independence Act would still provide the same level of funding to the school districts but would eliminate school property taxes by using state revenues.  Cox proposes funding the new state revenues using three sources.  First, he suggests raising the state’s personal income tax to 4 percent (from the current 3.07 percent).  Secondly, Cox has specific sales tax loopholes that would close and finally, HB 1776 increase state sales tax from 6 percent to 7 percent.

Loopholes in the state’s sales tax include currently exempt personal services such as dry cleaning, funeral expenses, and amusement parks and professional services such as legal, architectural and accounting. HB 1776 would also close sales loopholes that exempt newspapers, magazines, flags, gum, candy plus clothing and footwear (items $50 and higher). I had no idea that newspapers and magazines were sales tax exempt – you pay sales tax on books, so I don’t see why there isn’t sales tax on newspapers and magazines!  Flags – exempt? Yes, US Flags and Commonwealth flags are exempt from sales tax.

The Pennsylvania Taxpayers Cyber Coalition, which states that they are ‘dedicated to equitable tax funding of Pennsylvania schools’ believes that “… Runaway property taxes are destroying Pennsylvania’s economy, driving away its residents, and are discouraging entrepreneurs from starting new businesses that would create jobs for Pennsylvanians.”  The group has created the following list of ten reasons why property tax should be eliminated in Pennsylvania:

  1. Achieve True Home Ownership
  2. Stabilize school funding
  3. Help prevent foreclosures
  4. Restore plummeting real estate values
  5. Boost the sagging housing market
  6. Attract business to Pennsylvania
  7. Generate jobs for Pennsylvanians
  8. Create a massive stimulus for Pennsylvania
  9. Increase personal wealth
  10. Stop costly reassessments

Looking over this list of reasons to get rid of property taxes, I’m struggling to see the downside to this proposed legislation?  Most of the items on the list would be very helpful to the school districts as they struggle to meet the demands of their budgets.  Wouldn’t we like to ‘stabilize school funding’ and not worry about ‘costly reassessments’ from commercial and residential homeowners affecting school district budgets?

Eliminating property tax escrow payment would certainly help all homeowners and I would think could encourage new home ownership.  Tredyffrin Easttown School District residents have been fortunate for the most part, as property values (although not increasing) have not declined as many other areas in Pennsylvania.  But realistically, how much longer will TESD residents enjoy that situation?  If TESD is forced to continue to make cuts to meet the demands of the budget, our property values may suffer as a result.

It looks to me like the proposed Property Tax Independence Act could be a win-win for school districts and taxpayers.  It would eliminate the need for school property taxes but on the other hand would stabilize funding for school districts through the use of a broader revenue system by utilizing sales and use tax. HB 1776 provides for a predictable revenue stream which would allow school districts to focus on education and the performance of their students instead of the continuing budget crisis.

If the Property Tax Independence Act were to make it through the legislative approval process, it would immediately freeze school property taxes at its current levels and begin reducing school property tax bill with the next tax bill. Clearly, I must be missing the real ‘negative’ in the school finance reform as proposed by HB 1776 because you know the saying, “if it looks too good to be true, it probably is”! Here’s hoping that someone gives me a reason why HB 1776 isn’t a good idea.

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