Pa. lawmakers need to try this fairer, more equitable approach to property tax reform | Ray E. Landis

March 8, 2020 6:30 am

Is it time to again have a debate about eliminating property taxes in Pennsylvania? Senate Republicans think so, because they’ve held public policy meetings on the topic.

This renewed discussion does provide an opportunity to take a clear-eyed look at the issue. While rising property taxes threaten to make it unaffordable for some to remain in their homes, for many Pennsylvanians the “cure” of property tax elimination is worse than the problem. But there is a way to help those who are truly in danger of being forced from their homes without jeopardizing public education or creating hardships for working families.

Let’s begin with an uncomfortable truth – many of those who complain the loudest about property taxes aren’t really in danger of losing their homes because they can’t afford the tax rates.

They often have an ideological opposition to property taxes, and some seem to be motivated by a resentment of paying taxes for public education when they have no children in school and sense that spending on things like teacher salaries is out of control.

Educational costs have risen, but the reasons stem more from what public schools are asked to do in today’s world than teacher pay. Special education costs are a major factor, not to mention pensions, school security, and meeting the requirements established by various governmental bodies.

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There isn’t an answer to satisfy those who don’t believe they have a responsibility to contribute to the education of young people. Public education must continue to be the reflection of our collective belief of giving every individual an opportunity and an educated population benefits everyone in our society.

The question, then, becomes how to pay for the costs of public education. Eliminating property taxes results in a gigantic tax shift. Income and sales taxes would need to rise dramatically to make up the revenue lost from property taxes.

Who wins in this scenario?  Older Pennsylvanian homeowners who no longer work and don’t need to spend as much (and already have their retirement income protected from taxation).

Who loses? Working Pennsylvanians and families. Should the retiree with a nice house, a significant pension and fewer out-of-pocket expenses get a tax break at the expense of the family struggling with student debt, a mortgage, and the need to make contributions to a 401(k) retirement account because their employer no longer has a pension plan?

In the state House, Rep. Frank Ryan, R-Lebanon, has introduced a property tax elimination plan that taxes some retirement income as a part of a tax shift. It may be the most honest attempt to pay for property tax elimination – but it faces opposition from many angles, most vocally from those who would have their retirement income taxed.

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But as the property tax elimination debate ebbs and flows there are individuals in imminent danger of being forced from their homes because of rising property taxes. Many of them are older Pennsylvanians without the luxury of a pension and significant retirement savings.

There is already a remedy in place for that reality, however. The Lottery-funded Property Tax/Rent Rebate program provides property tax relief for Pennsylvanians over the age of 65 with incomes up to $35,000, excluding ½ of Social Security income.

There’s a big “but” with this program, however. The upper limit on property tax relief is $650 and most Pennsylvanians who qualify for the program are eligible for only $250. With rising property tax rates, that amount is not going to rescue many of the older Pennsylvanians who are truly in danger of being forced from their homes.

Boosting the amount of the rebate won’t come without a cost, of course. Lottery revenues are spoken for and although casino revenues also contribute to the program, it will take another source of funding to get the rebate to a meaningful level.

There is an additional approach that would lower property taxes for many homeowners – increasing the state share of education funding to reach the desired 50/50 split between state and local revenue for the statewide average per pupil cost. Again, this would require additional state revenue, but it would lessen the need for local revenue.

A more robust Property Tax/Rent Rebate program and increased state spending on public education would result in a tax shift that wouldn’t be as dramatic as the elimination of property taxes. It would be a fairer approach to a concern that has dogged elected officials in Pennsylvania for decades. It’s time to give it a try.

Capital-Star Opinion contributor Ray E. Landis writes about the issues and policies that matter to older Pennsylvanians. His work appears biweekly. 

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Ray Landis
Ray Landis

A former spokesman for the Pennsylvania AARP, 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.