House to vote on property tax relief
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HARRISBURG -- The state House plans to vote this week on two important bills intended to bring a sizable amount of property tax relief -- probably several hundred dollars a year -- to Pennsylvania homeowners.
But neither of those bills -- even when combined with as much as $1 billion from gambling revenue -- will come anywhere near eliminating all property taxes in Pennsylvania. In fact, the two bills involve "tax shifting," reducing taxes on property by increasing taxes in other areas.
The House is likely to pass one bill or the other and send it to the Senate for consideration.
House Bill 1600, proposed by state Rep. David Levdansky, D-Forward, would generate about $1.5 billion in revenue by increasing the sales tax by 0.5 percent and raising the personal income tax rate to 3.29 percent, up from the current 3.07 percent.
That $1.5 billion would be combined with gaming tax revenue coming from the six slots casinos that have opened in the state over the past 15 months. The gaming tax revenue now stands at $576 million, according to a new report by state Budget Secretary Michael Masch.
Gov. Ed Rendell, a strong proponent of gaming, said slots revenue could reach $750 million or more next year and will almost certainly exceed his predicted $1 billion mark within a year or two, as up to 14 casinos open.
"We're on a track to blow by that $1 billion in [tax] relief," he told Capitol reporters last week.
When will that happen?
"I don't know,'' he said. "It depends on how fast we get these casinos up, especially the one in Pittsburgh and the two casinos in Philadelphia.''
And when all 14 casinos are up and running in two or three years, "The projections are for $1.3 billion, $1.4 billion and maybe even $1.5 billion" for property tax relief.
Also this week, legislators will vote on House Bill 1489, introduced by Democratic leader Bill DeWeese, of Waynesburg. It's more modest, merely raising the sales tax by 0.5 percent and adding it to the current $576 million slots revenue, providing a smaller property tax cut.
But some skeptics are saying -- wait a minute. Why do sales or income taxes have to be raised to lower property taxes? Isn't that why slots parlors were legalized in 2004, to raise money to eliminate property taxes?
"It seems as if significant property tax relief will come only with a rise in the state income tax and/or the state sales tax," complained Forest Hills resident Art Fleming. "No wonder people don't believe politicians.''
South Park resident Al Hessler said he thought that slots revenue alone "would provide property tax relief for Pennsylvania property owners and eliminate the need for additional taxes to accomplish that relief."
If citizens have to pay higher sales and income taxes, it means that homeowners are "lowering a good portion of [their] property taxes out of their own pockets. What happened to the original story that the slots bill would take care of [property tax relief]?"
Asked about that last week, Mr. Levdansky said, "No one ever claimed that the [tax] revenue from slots would completely eliminate school property taxes. Nobody ever said that."
Except for new revenue produced by casinos, the issue of lowering property taxes "has always been one of tax shifting," increasing some other tax so that property taxes can be lowered, he said.
Mr. Levdansky said the state would need more than $5 billion in additional revenue to completely eliminate school property taxes paid by homeowners. The $1 billion or more from gaming, while welcome, can't replace that $5 billion in property tax revenue, he added.
The governor also said last week that he never intended to take property taxes completely out of the mix for funding public education.
"I said, during my [2002] campaign, you can't eliminate the property tax. You'd have to raise billions and billions in new revenue, and [eliminating the property tax] is not a good idea. The property tax should be in the mix [for funding schools]. It's a stable, good tax. I promised we would reduce property taxes by over $1 billion, and we will."
Some property owners, about 540,000 senior citizens with maximum incomes of $35,000 a year, were the first to receive state money for property tax relief or rent rebates in July. Mr. Masch said $234 million from gaming revenue was distributed.
But this July all homeowners will, for the first time, share in the property tax relief that results from $576 million in gaming funds. It's difficult to pinpoint exactly how much each homeowner will get, because of differences in tax rates, house values and school budgets among the 501 school districts.
But Mr. Levdansky estimated the checks should be in the range of $200 to $400, depending on which school district a homeowner lives in.
If House Bill l600 is enacted, adding sales taxes and income taxes to the pot of gaming money, he estimated that some homeowners could see a property tax cut of as much as $1,200.
"Under my plan most people will see [a property tax reduction] of between $500 and $1,000" per year, he said.
"I view the slots revenue as a foundation to build on [for tax relief] but we need to go farther." To accomplish that, there must be "tax shifting," using revenue from higher sales taxes and income taxes.
By doing so, he said he was "trying to respond to people's desire for more significant property tax relief" than the $200 or $300 they would get from slots money alone.
"I am hoping for a reduction for many people of one-third or even one-half" in their property taxes, he said. "I think people would call that significant."
He said sales taxes and income taxes can be used because "they are fair and equitable, broad-based, predictable and can be efficiently collected."
But there's another issue regarding lowering school property taxes -- keeping school boards from simply raising them in future years.
Mr. Levdansky said Act 1, passed in June 2006, prevents school budgets from rising beyond the inflation rate in any given year. If they do, residents get a chance to vote on the school budgets in what is called a "back-end referendum."
But the 2006 law contains 10 exceptions for expenses that don't have to be figured into the percentage of cost increase, thus making it harder to force a referendum.
Mr. Levdansky said he's talking to other legislators about creating "cost containment measures" in the law and narrowing the number of spending exceptions.
First Published January 27, 2008 12:00 am
