Rep. Frank Ryan, R-Lebanon, speaks at a Capitol press conference on property tax elimination on Tuesday, August 20, 2019. (Capital-Star photo by Stephen Caruso)
The age-old issue of property taxes made a reappearance in the state Capitol news feed recently when state Rep. Frank Ryan, R-Lebanon, introduced revamped legislation to end funding of public schools through local levies on property.
The property tax issue has been discussed, debated, dismissed, exploited, explained, exaggerated, and recycled again in the commonwealth over the years. Here is what I wrote two years ago.
Elected officials constantly tell Pennsylvanians, especially older Pennsylvanians, this is the year the situation will finally be addressed – but as Gov. Robert Casey said back in the 1980s when his constitutional amendment to reform the property tax system was defeated at the polls, if paying for public education without using funding from property taxes was easy it would have been done long ago.
It is unlikely Ryan’s (who is not running for re-election in 2022) legislation is going anywhere this year, but the reason this effort is doomed is not because it tries to avoid the tough questions about paying for public education like most efforts to change the property tax structure. Instead, it attacks them head on.
This proposal raises the personal income tax, taxes pension earnings (with the exception of Social Security), increases the sales tax, and imposes a sales tax on items currently not taxed, including clothing and food (with some exceptions).
The bill demonstrates the true cost of adequately funding public education through the taxes which would need to be imposed to equal the revenue currently generated by property taxes. And it is those tax increases which make Representative Ryan’s idea a non-starter.
His colleagues in the GOP will blanche at the idea of personal tax increases (especially taxing pension income of high-income seniors). Democrats will pounce on the rise in the sales tax, particularly taxing food and clothing.
Ryan and I disagree on almost every issue imaginable (including the need to totally eliminate property taxes), but those who simply dismiss his focus on this issue are missing an important reality and an important opportunity.
Property taxes are a serious issue for many Pennsylvanians, especially older homeowners who are “house rich but cash poor.” A true effort to make them fairer would not only be politically expedient but has the potential to make the overall tax system much more progressive in the commonwealth.
We have a regressive personal income tax in Pennsylvania. Our flat tax of 3.07% means those with higher incomes who should contribute more to improve state services and address our demographic challenges do not – and will not, unless the state constitution is amended (and this is not one of the issues Republican members of the General Assembly have on their long list of proposed Constitutional amendments).
Of course, property taxes are also regressive in they are a set percentage of the assessed value of a property. But there are two mechanisms to give lower-income individuals relief from property taxes.
The first is the homestead exemption, originally established as a way to return revenue from gaming to homeowners. The homestead exemption reduces property taxes by a set dollar amount for every primary dwelling in a school district. The amount of the exemption varies by school district.
The homestead exemption is wildly inconsistent across Pennsylvania, with school districts receiving different amounts of relief per homestead. But it has the roots of a progressive system, as those with lower-valued homes, and presumably lower incomes, get a higher percentage of reduction in their property taxes.
Similarly, the property tax and rent rebate program offers a set amount of relief to homeowners and renters who meet the income and age qualifications.
Funded by Lottery revenues, the program is open to Pennsylvanians over the age of 65, widows and widowers over the age of 50, and disabled individuals over the age of 18 whose income does not exceed $35,000 ($15,000 for renters), with one-half of Social Security income excluded.
The structure of these programs offers a way to bring property tax relief to many more Pennsylvanians while making our overall tax system fairer. Expanding these programs, by increasing the amount of relief provided and increasing the number of people eligible for them, would result in more Pennsylvanians able to afford a home or their rent.
Paying for this expansion can be done by utilizing two of the ideas in Representative Ryan’s legislation. The first is by taxing retirement income, excluding Social Security. We must acknowledge the changing demographics of the commonwealth and recognize wealthy retirees should contribute to state services. The second is to expand the sales tax to many of the services currently exempt – but not to food.
Instead of eliminating property taxes, expansion of relief programs and increasing the commonwealth’s contribution to funding public education are better and fairer ways to answer the calls of Pennsylvanians for easing the burden of these taxes on their family budgets.
Besides, after not paying property taxes in Pennsylvania for all their adult lives, why should Republican multi-millionaires Dave McCormick and Mehmet Oz be rewarded with a tax break after they finally bought homes in the state which they want to represent in the United States Senate?
Opinion contributor Ray E. Landis writes about the issues that matter to older Pennsylvanians. His work appears biweekly on the Capital-Star’s Commentary Page. Readers may follow him on Twitter @RELandis.
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