Pennsylvania Lawmakers Consider Property-Tax Swap Bill
Bill would slash property taxes, hike state personal income tax
The Pennsylvania House of Representatives’ Finance Committee is considering a bill that would amend the state’s Taxpayer Relief Act of 2006 to eliminate the property tax collected by school districts on residential properties and farms.
An amendment to the Pennsylvania Constitution approved by voters in 2017 increased the allowable exclusion to 100 percent of the assessed value, if the revenue that would be lost to school districts is replaced by the state legislature. If fully funded, this change would allow school districts to eliminate property taxes on homesteads and farms.
House Bill 2329 (H.B. 2329), proposed by Pennsylvania state Rep. Marcia Hahn (R-Northampton), would swap the property taxes for schools for a 1.72 percentage-point increase in the state’s personal income tax rate to fund education.
‘People Are Losing Their Homes’
Hahn says the property tax burden is becoming too much for some Pennsylvanians.
“The problem is people are losing their homes,” Hahn said. “When that property tax bill comes in August, it’s a huge hit. We’re trying to alleviate that so you can be in your own home, you can buy property, have your own house, without worrying about it being taken for taxes.”
‘Spending Is the Real Culprit’
The tax hikes are a symptom of out-of-control government spending, says Bob Dick, a senior policy analyst for the Commonwealth Foundation.
“The solution to this problem isn’t to reshuffle the tax burden,” Dick said. “Spending is the real culprit. It continues to drive taxes higher and higher each year, and until the state and local governments address overspending, high taxes will persist.”
Hahn says one reason for skyrocketing property tax rates are legal provisions in the school funding formula that gives some school districts money that doesn’t serve students.
“We have what's called ‘hold harmless,’” Hahn said. “If you’re a school district and you’re losing population, the hold-harmless clause says you cannot receive less than you previously received from that point on. You could lose half your students and still get the same amount of money. Those of us in growing districts, because of the funding formula, aren't getting the increased revenue that we should be getting.”
‘Winners and Losers’
H.B. 2329 would favor retired homeowners at the expense of small business owners and renters, Dick says.
“As with all tax shifts, there will be winners and losers,” Dick said. “Property owners who don’t currently pay a state income tax stand to gain from the legislation. Those who don’t directly pay property taxes now, or small businesses that pay the state personal income tax, will likely see their tax bills rise.”
Making Houses Affordable Again
Hahn says H.B. 2329 would encourage more people to become homeowners.
“If you're a renter, if you don’t have a property tax bill to pay, it’s going to make home ownership more affordable,” Hahn said. “More people will be buying homes.”
Jeff Reynolds (email@example.com) writes from Portland, Oregon.
Pennsylvania state Rep. Marcia Hahn (R-Northampton):