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Host: Scott LaMar
Property taxes. Those two words elicit a howl of derision, and at least one clever visual protest, from legions of Pennsylvanians who feel they are overtaxed, overburdened and overdue for relief. But the property tax is the lifeblood of financial support for Pennsylvania's counties, municipalities, and 500 school districts. Alone, property taxes haul in some $12 billion a year for public schools.Therefore, any fix or alteration to the current system must generate that same amount of revenue. It is the major reason why property tax reform has been so elusive for so long in the Commonwealth of Pennsylvania.
Our guests this week are: State Rep. Gordon Denlinger, (R-Lancaster County,) Jim Rodkey, chair of the Lebanon 9-12 Project, Alex Halper, director of government affairs for the Pennsylvania Chamber of Business and Industry, and Warren Hudak, president of Hudak & Company, an accounting firm in New Cumberland, PA.
The fervor for a property-tax overhaul has intensified. This week, the state House of Representatives debated a four-bill package that would allow school districts to eliminate property taxes and tailor their tax options in ways they see fit. The four bills, as outlined by the GOP caucus, are:
House Bill 1189 (Rep. Seth Grove, R-York County): Gives local school districts the ability to eliminate property taxes in favor of an array of taxing options that best suits the individual needs of residents and students of local school districts.
House Bill 125 (Rep. David Maloney, R-Berks): Amends Pennsylvania’s Constitution giving local taxing authorities the power to exclude 100 percent of homesteads from property taxes.
House Bill 1677 (Rep. Doyle Heffley, R-Carbon): Amends state law to eliminate homestead exclusion limits of one-half of the median assessed value of a homestead property.
House Bill 1685 (Rep. Kerry Benninghoff, R-Centre/Mifflin): Allows school districts to increase the Earned Income Tax (EIT) rate for the purpose of providing homestead exclusions, instead of through voter referendum. It allows school districts to use their property tax reduction allocation for general government operations if they eliminate their property taxes.
Under current law, school districts receive slot machine revenue from casinos to make up for homestead exclusions. This package of bills would eliminate homestead exclusions. However, under HB 1685, districts that eliminate property taxes would be able to receive their allotment of slots revenue. Republican supporters say this change could boost funding statewide by more than $525 million.
The House on Wednesday passed HB 1189. It now goes to the Senate. Under the bill, all school districts would have the option to replace some or all of their property taxes with revenue generated from the earned income and/or business taxes. Many districts derive income, too, from a host of so-called "nuisance taxes," like occupational assessments, amusement taxes, and occupational privilege taxes.
A State Capitol rally last week in favor of property tax reform attracted hundreds of supporters. They especially praised House Bill 76 — which is bottled up in committee — and Senate Bill 76 which would eliminate school property taxes in favor of higher income and sales taxes. Taxpayer groups say reliance on property taxes is unfair and drives up home foreclosures, particularly among senior citizens.
At the same time, some of the loudest voices urging lawmakers to slow down when it comes to reform are in the business community. The Pennsylvania Manufacturers' Association, the National Federation of Independent Businesses, and the PA Retailers' Association, among others, take exception to HB 1189 because it allows school districts that eliminate property taxes to levy an earned income tax on residents, as well as business privilege and mercantile taxes. And, they're not too fond of Rep. Jim Cox's Property Tax Independence Act. It replaces property taxes with higher personal income and sales taxes. Business groups say it would drive up prices which will drive away their customers. When Cox tried to amend his bill into HB 1189 this week, lawmakers shot it down.
The left-leaning Pennsylvania Budget and Policy Center denounces the property-tax reform package, too, especially HB 76. PBPC executive director Sharon Ward wrote of that bill, "This property tax plan will do irreparable damage to a generation of Pennsylvania students. It pulls the rug out from under our public education system and ignores the real problem — that too few state dollars support our schools." The PBPC argues for more state investment to ease pressure on local property taxes as the bulwark of funding for schools.
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