Would the average homeowner get a more than 50 percent property tax cut under Wolf’s plan?
Photo by AP Photo/Matt Rourk
(Harrisburg) — Gov. Tom Wolf has promised big property tax cuts if lawmakers pass his budget.
In his March 3 budget address, Wolf said his plan would reduce the average homeowner’s “property taxes by 50 percent, putting more than $1,000 each year into their pockets.”
His administration and campaign committee have often repeated a version of that statement, sometimes promising a property tax cut of more than 50 percent for the average homeowner.
We are fact checking that statement, looking at the impact in York County and statewide.
How Wolf’s plan works
There are two main parts.
Wolf would reduce property taxes directly for homeowners by increasing the benefit known as homestead and farmstead exclusions.
If the property tax reduction reaches a certain constitutional limit for homeowners in a district, then whatever money is left over would be used to reduce property taxes for business owners and others by reducing the millage rate.
How much money Wolf would give for property tax reduction
Pennsylvania homeowners already get money for property tax reduction, although Wolf is proposing a lot more.
The Wolf administration estimates the governor’s plan will provide $3.8 billion for property tax reduction in the 2016-17 school year.
That $3.8 billion figure includes more than $600 million that homeowners currently get from gaming revenue, according to budget documents. The $3.8 billion also includes money that would go to reduce several taxes in Philadelphia besides property taxes: wage tax relief, local cigarette tax elimination and local sales tax reduction.
What the numbers show for York County
Wolf has said his plan would give a higher share of state funding to communities with high poverty and high tax rates.
For instance, in the York City School District, school property taxes would be nearly eliminated for both businesses and homeowners. The school district’s millage rate would decrease from about 33.74 to 0.44, according to Pennsylvania Department of Education projections. Municipal and county property taxes would remain.
In York County, four out of 16 school districts would get enough money that they would then have to lower millage rates: York City, Dover Area, Northeastern and Hanover Public.
So would York County homeowners get a 50 percent cut?
It depends on the district and the value of the home.
The Pennsylvania Department of Education has released figures for median household tax bills, those that are in the middle for a district. They give you an idea of the impact.
A median household would get at least a 50 percent cut in York City, Dover Area, Northeastern and Hanover Public, if you count the more than $600 million statewide homeowners already get in existing gaming revenue as part of Wolf’s $3.8 billion package.
But if you keep that $600 million separate, the results are different.
Here’s an example:
The Department of Education estimates that a median homeowner in the Dover Area district has a $2,676 school property tax bill for 2014-15, not counting any current gaming revenue reductions.
The department estimates that a median homeowner in that district would get a $1,460 tax cut, or a 54.6 percent reduction in his or her current tax bill, under the governor’s plan.
That cut would be made up of $173 in current gaming revenue and $1,287 in new relief.
The $1,287 cut is 48 percent of the homeowner’s total current tax bill before any reductions.
If you do the math like that, only in the York City School District would a median homeowner still get a more than 50 percent cut from new money.
Would York County homeowners get a $1,000 property tax cut?
Again, it depends.
If you count the cuts from current gaming revenue and Wolf’s proposed new cuts, then in 10 districts a median homeowner would get a more than $1,000 cut. Those districts are: Southern York County, Central York, Dallastown Area, West York Area, Hanover Public, South Eastern, Dover Area, Red Lion Area, Northeastern York and York City.
If you don’t count the current gaming revenue, then in nine districts a median homeowner would get a more than $1,000 cut from new money. Southern York County would be off the list.
For instance: a median homeowner in Southern York County would get a $1,024 reduction, made up of $177 of current reduction money and $847 of new money.
Wolf’s source
Wolf’s press secretary, Jeff Sheridan, responded to questions about what the administration considers an “average homeowner” with a formula for dividing $3.8 billion in tax relief by $7.4 billion of “2016-17 Homestead Property Tax” to get a 51.35 percent reduction.
The $7.4 billion is an internal estimate of the amount homeowners are expected to pay in school property taxes in 2016-17, according to Wolf communications director Mark Nicastre.
But if you don’t include the about $600 million in current gaming revenue, then dividing $3.2 billion by $7.4 billion would get you an about 43 percent reduction for local property taxes.
The administration’s estimate does not account for another part of Wolf’s plan:
It targets direct relief for homeowners first, but some districts would see property tax reduction for both businesses and others. That would lower the estimated relief for average homeowners.
As for the estimated reduction of more than $1,000, Nicastre did not specifically say how the administration came up with that estimate, only that it did the calculation many ways.
What about statewide?
The Department of Education has put out estimates for all 500 Pennsylvania school districts.
It estimates that in 311 districts, a median homeowner would get a school property tax cut of more than a 50 percent, if you count the current gaming revenue and Wolf’s proposed new cuts.
A median homeowner in 163 districts would get a school property tax cut of at least $1,000, counting current gaming revenue and Wolf’s proposed new cuts.
There are other ways to measure it.
You could take all the homesteads and farmsteads that are eligible for a direct tax benefit, which is nearly 2.8 million, according to Department of Education estimates for 2014-15.
If you divide the $3.8 billion of relief by 2.8 million, you get about $1,357 per homestead and farmstead. But, as mentioned earlier, not all of that $3.8 billion is new money or going directly to homeowner property tax relief. If you subtract those things out, that drives down the average.
The verdict: Not truly 50 percent … but still significant tax relief
Strictly speaking, the promise of a 50 percent cut in property taxes wouldn’t hold true in most York County school districts. That doesn’t mean it’s a bad plan, though. Taxpayers in suburban and rural districts would still see significant reductions in property taxes. And Gov. Wolf’s proposal could be a real game changer for York city. The reduction of school taxes to essentially zero would likely lead to much-needed investment in city real estate.
–Scott Fisher, Opinion page editor
Tax calculator
To pay for cutting property taxes, Gov. Tom Wolf is proposing raising the personal income and state sales tax rates. Would you be a net winner or loser? Check out our online tax estimator at ydr.com to get an idea.
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