School tax bills put on back burner

Legislature uneasy about eliminating property tax

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HARRISBURG -- The state Legislature can't bring itself to vote on the thorny issue of eliminating school property taxes, and yet it can't stop battling over the idea either.

"We have met the enemy and it is us," state Sen. Jim Ferlo, D-Highland Park, quipped last week at a hearing on Senate Bill 1400.

He's a co-sponsor of the bill, which is risky to lawmakers because it would cost state school districts at least $9 billion a year, while shifting the job of collecting property taxes from the 500 local districts to state officials. Opponents wonder if the state will send back to local districts the full amount they are owed.

Critics also fear the loss of school tax revenue could be as high as $12 billion -- which everyone agrees would be a staggering amount to make up through other levies.

The Senate bill is the same as House Bill 1776, debated by House members this spring but currently stuck in the Finance Committee.

To compensate for the lost school taxes, both bills would increase the state's personal income tax rate to at least 4 percent from the current 3.07 percent. They also would increase the statewide sales tax rate to 7 percent (or possibly higher) and would eliminate many popular sales tax exemptions -- possibly including longtime exemptions for food and clothing. Allegheny County's sales tax, now at 7 percent, would go to at least 8 percent.

Such changes, obviously, have legislators nervous about how their constituents will react.

"Everyone wants to go to heaven but nobody wants to die," said Sen. John Wozniak, D-Cambria, referring to legislators' desire to eliminate school taxes but their fear of residents' anger over raising the income tax or sales tax.

Much of the impetus to eliminate school property taxes is coming from eastern Pennsylvania, where rising home values have increased the school tax burden to as much as $10,000 a year. Older homeowners on fixed incomes loudly complain that rising school taxes are forcing them to sell the homes they've lived in for years.

Getting rid of school property taxes "is easily the No. 1 issue at public meetings in the six counties I represent," Sen. David Argall, R-Schuylkill, said at last week's Finance Committee hearing. "Over 2,300 people in just my Senate district have signed petitions against school taxes.''

He and Sen. Mike Folmer, R-Lebanon, are leading the effort in the Senate, while Rep. Jim Cox, R-Berks, is sponsor of the now-tabled House bill.

Neither the Senate nor House bill is expected to come up for action when the Legislature returns in late September for the final few days of the 2011-12 session. However, continued pressure to get rid of property taxes as a school funding mechanism will almost certainly bring the divisive issue back for discussion when the new session opens in January.

Last week, a dozen groups on both sides of the property tax issue spoke. Supporters of eliminating school taxes included the Pennsylvania Coalition of Taxpayer Associations, led by David Baldinger.

"Homeowners of all ages are facing extreme pressure because of relentlessly rising school property taxes," he said. "As many as 10,000 Pennsylvanians lose their homes to sheriff's sales each year."

Supporters of the two bills say property taxes are hard on owners of both residential and commercial properties. "The property tax, through its uncertain nature, discourages small business expansion and hinders job growth," Mr. Baldinger said.

But opponents include influential groups such as the Pennsylvania Chamber of Business and Industry and the Pennsylvania Association of School Business Officials. The latter said SB 1400 "will create a whole host of problems that make the legislation unworkable."

It argued that the annual adoption of school budgets "will become chaotic, as school funding is determined in a last-minute fashion" by the state, just as new school years are starting in July.

The Pennsylvania Retailers Association asserted that using the sales tax as a replacement "is not a stable or predictable revenue source for school district funding." Increasing the sales tax "will negatively affect retail businesses and low-income wage earners."

Other opposition came from groups representing lawyers and newspapers, which would have their services subjected to a sales tax for the first time.

"Legal services are necessities," said Thomas Wilkinson, state bar association president. "People hire an attorney because they have to, not because it is an optional, luxury service."

Lawyers are needed for necessary things such as "probating a will, defending against a [legal] action or fighting an assessment by their township," he said, and those who need a lawyer shouldn't be subjected to a new 7 percent tax.

The full text of both bills can be read at www.legis.state.pa.us.

education - state

Tom Barnes: hickeybarnes@yahoo.com or 717-623-1238.


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