State House Sound Bites

Capitol reporter Katie Meyer covers Pennsylvania politics and issues at the Pennsylvania state capitol.
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Property tax elimination plan needs re-tooling, says IFO

Written by Mary Wilson, Former Capitol Bureau Chief | Oct 1, 2012 8:27 PM

Thumbnail image for Harrisburg Capitol building with fountainThe state’s Independent Fiscal Office says a plan to phase out property taxes comes up short, but lawmakers say the analysis won’t doom the proposal.

The report says the plan to raise higher tax rates on personal income and purchases in lieu of phased-out school property taxes wouldn’t leave enough money for the state’s school districts.

Schools would lose between one and two billion dollars under the plan.

“The proposal as it’s currently written is a little short,” said IFO director Matthew Knittel, “both regarding the dedicated revenues and the proposed distributions to the school districts.”

Sponsoring state Rep. Jim Cox (R-Berks) said the report doesn’t amount to a nail in his bill’s coffin. He said the proposed tax rates just need tweaking to make the plan feasible.

“It’s going to likely be an increase in the PIT (Personal Income Tax), is what I’m going to recommend to fill any gap that exists,” said Cox.

His measure proposes an increase in the Personal Income Tax rate from 3.07 to 4.01 percent. He guesses now he proposed rate may have to go up to 4.4 percent. He would leave unchanged the parts of the legislation to raise the sales tax rate by one percent, and start taxing purchases that are currently exempt, like dry cleaning, newspapers, and funeral expenses.

The IFO report finds increases to the PIT, as well as the state sales tax, means retired homeowners could see more than 37 percent shaved from their tax burden, while working renters would see about a ten percent increase.

Cox says he’s not giving up on the legislation this year. “If I can get the bill up for a vote, I’m going to push it,” he said. “I’m not going to stop pushing on this until our last day of session.”

But Rep. Thomas Quigley (R-Montgomery), who chairs a House committee devoted to property tax reform, said “realistically,” an amended piece of legislation won’t be ready until next year. That said, though, he hardly viewed the IFO report as a damning analysis. Instead, he called it a “blueprint” exposing the plan’s shortfalls and showing lawmakers what’s needed to make a tax-shift plan work.

But lawmakers are the ones doing the drafting now that the IFO has joined the Department of Revenue and a private realty firm to assess the fiscal impact of eliminating school property taxes.

“Where it goes from here, we’re not sure,” said Knittel. “We’re going to defer to the committee staffs to provide analysis of any future amendments. Most likely, our role in the process is now finished.”

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