A Caution on Property Tax ‘Reform’
A number of competing property tax reform and elimination bills have been introduced in recent history. The Governor has made property tax reduction a part of his budget, and we are likely to see a variety of proposals offering alternatives to the Governor’s proposal. Historically, property tax "reform" proposals have suffered from the same fatal flaw, and the Governor’s plan is no exception: they do not eliminate property taxes completely.
For any property tax reform measures to have a lasting impact, school districts must be prohibited from using that as a revenue source. If not, school boards will eventually increase property tax rates back to their current onerous level. This would result in taxpayers paying high property taxes and the increased tax rates instituted to pay for the "relief".
An additional problem with Governor Wolf’s proposal is that it is not revenue neutral. Taxpayers do not see a dollar for dollar decrease in property tax rates. Instead, only 30 cents of every dollar is used for tax relief. The other 70 cents is used for increased spending.
The final issue to consider is whether or not the proposal addresses the cost side of the problem. Every year pension costs are going to consume more of each school district’s budget. Today school districts must contribute almost 26 percent of each employee’s salary to the pension fund; in five years it goes up to 32 percent. If that problem is not addressed, taxes will go up to cover the difference. If costs like pensions, healthcare benefits, etc. are not addressed, whatever you replaced property taxes with will ultimately go up to cover the increase in expenses.
The questions to ask anyone pedaling property tax reform are:
Does it eliminate property taxes?
How does the proposal prevent schools from raising property taxes in the future?
Is it revenue neutral?
How are costs controlled to keep the new taxes from going up?
Unless these questions are answered to your satisfaction, the relief you are being promised is only going to be an illusion.
Citizens Alliance of Pennsylvania (CAP) is a non-profit organization founded to raise the standard of living of all Pennsylvanians by restoring limited government, economic freedom, and personal responsibility. By empowering the Commonwealth’s employers and taxpayers to break state government’s "Iron Triangle" of career politicians, bureaucrats, and Big Government lobbyists, this restoration will occur and Pennsylvania will prosper.