Pa. House legislators look to lower burden of property taxes
September 30, 2013 4:00 AM
By Karen Langley Post-Gazette Harrisburg Bureau
HARRISBURG -- The Pennsylvania House is expected to return this week to efforts to reduce property taxes, this time with a package of bills that would allow school districts to raise money in other ways.
Property taxes, which provide much of the funding for local schools, are particularly unpopular levies that for years have been the target of attempts at reform. Collection of real estate taxes has risen dramatically, growing from $5.43 billion in 1995-96 to $11.48 billion in 2011-12, according to the state Department of Education.
Lawmakers in 2006 succeeded in passing new limits on how rapidly school districts can increase property tax rates -- though many districts have taken advantage of exceptions -- but efforts to replace the tax on property with statewide increases in sales or income taxes have not come to pass.
Supporters of the legislation headed to the House floor this week say it differs in granting local districts the ability to replace some or all of their property taxes with other funding mechanisms.
"It builds on flexibility," said Rep. Seth Grove, R-York, who sponsored one of the bills. "It doesn't lock in school districts to do any single thing. It provides them the opportunity to say, we want to reduce millage rates, so we have that option."
His proposal would allow school districts to implement an additional earned income tax, mercantile tax (imposed on dealers of goods) or business privilege tax (imposed on providers of services) with the new revenues used to reduce school property taxes.
Another part of the package -- which would require amending the state Constitution, a multi-year process -- would allow local authorities to exclude from taxation the full assessed value of an owner-occupied residential property. Currently, local authorities can exclude up to 50 percent of the median assessed value of homestead properties within the taxing district.
The package of bills cleared the House Finance Committee -- chaired by one of the prime sponsors, Rep. Kerry Benninghoff, R-Centre -- on the first day back from summer recess and has the support of Majority Leader Mike Turzai, R-Bradford Woods.
But it will face a challenge on the floor from supporters of a proposal to eliminate school property taxes statewide and replace the revenue by raising the state personal income tax and sales tax rates, as well as applying the sales tax to products that are currently exempt. Rep. Jim Cox, R-Berks, indicated last week he would attempt to replace one of the bills with his proposal through an amendment on the House floor.
Steve Miskin, a spokesman for Mr. Turzai, said there are concerns that having the state collect and distribute school revenues would make it a "super school board" and lead to a loss of local control in education.
In 2011-12, statewide real estate tax collections accounted for 43 percent of total revenue for public schools, according to the Department of Education.
A number of business groups last week sent House members a letter opposing both Mr. Grove's and Mr. Cox's proposals. The Pennsylvania Chamber of Business and Industry, the Pennsylvania Retailers' Association and others questioned how the bills would affect business taxes.
"These different pieces of legislation that are under consideration now, they would shift costs onto employers and make it an even tougher business climate," said David Taylor, executive director of the Pennsylvania Manufacturers' Association.
The Pennsylvania Association of School Business Officials has lobbied against the full elimination of school property taxes, which it told House Finance Committee members in a letter last week would have a negative financial impact on school districts and taxpayers. The group urged lawmakers to reconsider how the state funds K-12 public education as part of any property tax discussion.
House Democrats have varied views on the property tax proposals but will argue on the floor that increases have been caused by inadequate state funding, said spokesman Bill Patton.
"Those property tax increases as a result of budget cuts from the state have turned up the volume on this conversation," he said. "But the root cause is the state's lack of commitment to fund education."
In the Senate, Republican spokesman Erik Arneson said the caucus has not discussed the specific House proposals but would like to address property taxes this fall. He said a proposal to freeze property taxes for senior citizens has significant support in the Senate.
A spokesman for Gov. Tom Corbett said the governor is committed to finding ways to alleviate property tax burdens and will work with the Legislature to determine how the proposals would affect the economy. The spokesman, Eric Shirk, said legislators also should consider ways to relieve the burden on senior citizens, such as by growing the state lottery fund.