How About a Blind Taste Test of Two Property Tax Relief Proposals?

Stephen Herzenberg |

Blind taste tests often produce surprising results. In our family, for example, the men often struggle to discern which wines are red and which white.

We think that if Pennsylvania’s Republican lawmakers are subjected to a blind test (without party labeling) of which of two property tax plans they like – Gov. Wolf’s or the Republican-sponsored plan that passed the House in mid-May – many would be surprised to find that they prefer the blue (Democratic) one to the red. The similarities between the two plans – and the benefits of Wolf’s plan for many Republican areas of the state – SHOULD make property taxes one area for potential compromise in the current state budget debate.

The Pennsylvania Budget and Policy Center laid out the facts on the blue and red property tax plans in a package of three briefs released last week. Gov. Wolf’s “blue” plan was unveiled as part of his 2015-16 budget proposal in March. The Republican property tax proposal passed the Pennsylvania House of Representatives in May.

PBPC’s analysis was the first to calculate and compare how much property tax relief typical homeowners in each of Pennsylvania’s 500 school districts would receive under each plan. We also used color-coded maps so all Pennsylvanians and their representatives can see at a glance which districts would get the biggest share of tax relief under each plan as well as the actual dollar amount of relief to be received.

Here’s what we found.

  • Both proposals would raise the state income tax by the same amount (from 3.07% to 3.7%) and also would raise revenues by increasing the state sales tax: the House proposal would raise the sales tax from 6% to 7% while the Wolf proposal would increase the sales tax to 6.6% but also impose it on some additional items not currently subject to the tax.
  • In most school districts, typical homeowners would receive similar dollar amounts of tax relief under both plans.

The two plans also have key differences:

  • HB 504 would use all the additional revenues raised for dollar-for-dollar property tax relief. The Wolf proposal would distribute less total tax relief ($3.8 billion versus $4.8 billion) and would use some revenue raised to meet other state needs, including closing the state’s structural budget deficit and reversing recent cuts to education funding. Given this difference, anti-tax advocates – who hate any net increase in revenues – prefer the House plan. But wouldn’t a true conservative favor fiscal responsibility and plugging the state’s deficit? There’s also broad support on both sides of the aisle – and among voters – for increasing the adequacy and equity of education funding.
  • While the Wolf proposal would give out less total property tax relief, a higher proportion of that relief would go to homeowners. The House proposal would lavish more property tax relief on non-residential properties such as golf courses, malls and other businesses, even though Pennsylvania’s property taxes on business are already below average.
  • The Wolf proposal would distribute more of its tax relief to lower-income and lower-wealth districts, including many Republican-represented rural and “property tax revolt” areas. In fact, typical homeowners in a majority of school districts in rural counties (128 of 238) would receive more dollars of property tax relief under the Wolf plan. The 10 school districts in the state in which residential property taxes are highest relative to income would receive very similar amounts of property tax relief under the House and Wolf plans.
  • A larger share of the tax relief under the House proposal would go to homeowners in more affluent school districts who have high property taxes partly because they want to generously fund local schools. For example, typical homeowners in affluent Radnor Township outside Philadelphia would receive $2,960 in property tax relief, while those in the city of Philadelphia would receive $474 in relief.

So this is our plea to Republican lawmakers and to their constituents. Put on a blindfold. Have a sip. Roll it around in your mouth. “Hmm, similar and sometimes more property tax relief. A state budget no longer put together with smoke and mirrors. More funding for local schools.” How does that taste? Now have a little water, and try the other glass. “More tax cuts for shopping malls. More property tax relief for people who aren’t clamoring for it and arguably don’t need it. A perpetuation of the state’s underfunding of schools and of the largest gap in funding between affluent and poor districts.”

Longstanding champions of property tax relief on both sides of the aisle in the capitol should find a lot to support in the Wolf plan if they give it a fair and objective look. If they do, Pennsylvania has a once-in-a-generation opportunity this year for real property tax reform. Here’s hoping a spirit of bipartisan problem-solving for the good of all Pennsylvanians wins out over a ritualistic thumbs-down on a proposal simply because of its blue package.