Plan by Pa. legislators to replace property tax falls short, study claims

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HARRISBURG -- Despite a discouraging financial report, the prime sponsor of a House bill to eliminate all school property taxes insisted Monday he will push forward with his plan aimed at helping home- and business owners.

Rep. Jim Cox, R-Berks, said he isn't discouraged by a new report from Pennsylvania's Independent Fiscal Office. It estimated that his bill would fall $1.5 billion short of generating enough money to replace the revenue that existing property taxes generate for public schools.

"This is far from over," said Mr. Cox, sponsor of House Bill 1776, the Property Tax Independence Act.

Rep. Tom Quigley, R-Montgomery, said he thinks a way could be found "to address public school needs that doesn't rely on property taxes," but the IFO report shows "how much more work needs to be done to ensure a proposal is fiscally sound."

The House Finance Committee almost voted on the Cox bill in June, but doubts among some legislators, including Rep. Tim Briggs, D-Montgomery, led to it being tabled. Tabling the bill upset many people who want to get rid of property taxes. But critics feared the bill wouldn't raise the full $10.6 billion needed to fund all 500 Pennsylvania school districts.

The IFO report, released Monday, "has confirmed the views I held in June," Mr. Briggs said. "House Bill 1776 simply does not raise the revenue it claims to provide."

The IFO report projected that the Cox bill would generate only $9.1 billion, or $1.5 billion less than what is needed. Mr. Cox said he appreciated the great financial detail in the IFO report and will use it to tweak his bill, which is currently before the Appropriations Committee.

His bill has three main sources of replacement revenue: hiking the state's personal income tax rate to 4.1 percent from the current 3.04 percent; raising the state sales tax rate to 7 percent from 6 percent. Allegheny County's rate, already at 7 percent, would jump to 8 percent. Philadelphia's rate, now at 8 percent, would go to 9 percent. Also, a number of goods and services that are now exempt from the sales tax would be taxable under the Cox bill -- and this has many legislators worried.

The newly taxable items would include candy, gum, newspapers, magazines, caskets, flags, textbooks, horses, spectator sports admission tickets, dry cleaning, basic cable TV and services by lawyers, accountants and architects. Some now-exempt clothing and food items also would be taxed for the first time, such as clothing items costing $50 or more.

One change that could be made in the bill, Mr. Cox said, would be to raise the new income tax rate to about 4.4 percent instead of just 4.l percent. He said he thinks that would generate another $1.5 billion.

The IFO report came out at a joint meeting of the Senate and House Finance committees and a special House committee studying property taxes.

Mr. Briggs said that because there are only a few days left in the current legislative session, "I think 1776 is dead for this year."

If there is no action by Nov. 30, when the current session ends, Mr. Cox will reintroduce the bill in the 2013-14 session, which opens in January.

Legislators want to respond to demands from opponents of property taxes, especially seniors, who turn out to vote in high numbers.

But the political danger of a sharp increase in sales and income taxes -- and especially from taking away longtime tax exemptions -- has lawmakers fearing a backlash and prevented them from acting on the bill.

state

Tom Barnes: hickeybarnes@yahoo.com or 1-717-623-1238. Laura Olson contributed.


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