On HB/SB 76 — Property Tax Elimination in PA

Marc Stier |

As we point out in our previous post, some people believe that the constitutional amendment on the ballot in November would make it easier to enact some version of the property tax elimination proposal, HB /SB 76. We are not sure that this is true. But if it were true, we would certainly oppose the constitutional amendment because HB / SB 76 is possibly the worst policy proposal we’ve ever encountered.

There is a superficial appeal to the proposal to replace the property taxes raised to fund Pennsylvania’s schools with state-wide income and sales taxes. We rely too heavily on local taxes, mostly property taxes, and far less heavily on state taxes to fund our schools. And the over-reliance on local property taxes is a main reason that we have the most inequitably funded schools of any state in the country. It is also why property taxes are very burdensome in some parts of the state, especially in the arc that runs from Lancaster and York Counties to the Poconos. Note, however, that on average property taxes are not higher in Pennsylvania than nearby states and that in many parts of the state they are quite low. We have long called for new state funding for the schools and targeted property tax relief for those whose property taxes are too high.

But when one looks at the details of HB / SB 76 it is clear just how crazy the proposal is. For it does not propose, as we have, that we allocate new state funding to those districts where school funding is far too low or where property taxes are far too high. Rather this proposal calls for locking in the existing distribution of school funding, basically forever. That is, enacting HB / SB 76 would give not one penny more to the relatively poor school districts that have not been able to raise enough money from property taxes to give students an adequate or equitable education. Rather it would embed the existing, immoral and unfair distribution of school funding to our laws.

That is not all that’s wrong with the legislation. Because HB / SB 76 raises income and sales taxes to replace the existing distribution of education funding, people who live in relatively poor school districts are likely to find themselves paying more in income and sales taxes than they do in property taxes, and the kids in their school district will not receive any more funding. Rather their additional taxes will go to support the best-funded schools in the stat,e which are found, of course, in prosperous communities.

And it actually gets worse: because the law calls for replacing taxes on commercial as well as residential property by income and sales taxes, it would continue the shift in taxes from Pennsylvania’s corporations to families. The new sales tax revenues proposed in the legislation would come in part from ending the exemptions of food and clothing from the sales tax, which means that the burden of taxation would fall more heavily on those with low income. And, of course, those who do not own a home, who tend to have lower incomes, are unlikely to benefit from the proposal at all.

The result of all these features of the proposal is that the main beneficiaries of HB / SB 76 would be those with higher incomes, while those with lower incomes would suffer from higher taxes and no better schools.

HB / SB 76 would have other problematic features. It would reduce local control over the schools by centralizing all funding in the state and capping what school districts could raise for their schools from their own communities. And, by totally eliminating all property taxes for school funding, it would replace the most stable source of revenue for the schools with revenues from income and sales taxes that can vary a great deal from one year to another.

HB / SB 76 is a terrible proposal that deals with a property tax problem that is found in only part of the state with a grandiose plan that would shift income from poor to rich and lock in our worst in the nation distribution of school funding.