Is it Sayonara to Property Taxes in Allegheny County?

Member Group : Allegheny Institute

(May 17, 2012)–Stop the reassessment in Allegheny County, no matter what it takes. That has been the consistent mantra from the County Executive (before and after his election) who has asked for the Legislature to enact a moratorium on court-ordered reassessments and has now enlisted the support of several City Council members. This group is backing an effort of a state Senator who wants to allow Allegheny County to end assessments and in so doing end the levying of property taxes by the County, its municipalities, and its school districts.

How would the Senator’s legislation accomplish this? By amending the Second Class County Code to permit the County Council to pass an ordinance forbidding property valuation, thereby precluding the County, its municipalities, and school districts from levying property taxes. If that did not happen, the legislation would allow for a referendum to be placed by either the County Council or the voters (under guidelines already in the Administrative Code of the County) to decide whether to eliminate assessments and thereby property taxes. After approval, the property tax would be replaced with other taxes by the County, the municipalities, and the school districts including wage taxes, personal income taxes, sales taxes, a per square footage property fee, or any tax available under Act 511.

There have to be significant concerns about this proposal, starting with whether a singular county and its political subdivisions can enact forms of taxation that they do not currently have the power to levy or if such a change has to take place on a statewide scale, affecting all counties, municipalities, and school districts. In 1988, the Legislature proposed the Local Tax Reform Act which, according to the Pennsylvania Tax Manual, would have reformed local taxes but required a statewide referendum to amend the state Constitution (the referendum was rejected). Also one has to wonder how a county governing body can dictate to the governing bodies of political subdivisions, especially school districts that are creatures of the state, that they can no longer levy a property tax.

There are significant effects on the County Home Rule Charter under the proposed legislation. The Charter’s first article is about preserving the powers of municipalities and makes no mention of Council powers vis-a-vis school districts, yet County Council—or voters in a countywide referendum—would be determining whether those subdivisions could levy property taxes. The Charter would have to be altered by the legislation as well since presently it permits Council to call for referenda only for the purpose of amending the Charter itself. And though tax shifts would be revenue neutral at first, further increases to new taxes would be done by majority vote, thus stripping the Charter requirement of a two-thirds vote to raise, ironically, property tax rates. It is difficult to imagine the Legislature taking up legislation of such a sweeping nature, let alone actually passing it.

Then there are real negative consequences to wiping out the property tax completely in Allegheny County alone. The level of sales taxes required to replace all property taxes including schools would have to double and would drive huge amounts of retail activity out of the County as non-residents stop coming into the County to shop and residents go to other counties to purchase non-essentials and avoid sales taxes.

Much higher income taxes? Could non-residents be required to pay them? If so, jobs and workers would begin leaving the County. Why would residents of Butler County pay taxes to their schools, county, and municipality and then be saddled with a big tax bill from Allegheny County to pay for schools and municipal services in Allegheny County?

Non-residents who own real estate but do not shop or work in the County would benefit enormously from not having to pay property taxes to the county, schools or municipalities. Think of out-of-state pension funds for example that own office buildings. That lost revenue has to be made up somehow, primarily by shifting the burden to residents. Is that fair to residents? It appears the Senator has not thought through his plan very carefully if he is truly interested in fairness.

The aforementioned officials could spend their time in Harrisburg urging the Legislature to rewrite Pennsylvania’s preposterously out-of-date and inadequate assessment laws to require periodic updating of assessments. Or they could urge amending the Constitution to eliminate the "uniformity clause" that is the source of all their angst. Or they could join others who want to restructure taxes at the state level to reduce the burden of property taxes. But they should not hold out much hope: a special task force appointed by the Legislature and charged with analyzing and making recommendations for reform of assessment laws recently released its report after an exhaustive six month study. The task force punted and came nowhere near recommending a meaningful fix for the state’s hopelessly inadequate assessment laws.

Sadly, the anti-reassessment group would rather make political points than work for changes that would actually address the sources of inequity explicitly impermissible under the Constitution.

Posturing while elected–a terrible, perhaps fatal disease in a self-governing polity.

Jake Haulk, Ph.D., President
Eric Montarti, Senior Policy Analyst

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