A Republican lawmaker on Tuesday officially released his plan to address the evergreen issue of local property tax elimination, with one new twist — a tax on retirees’ income.
Rep. Frank Ryan, R-Lebanon, held a Capitol press conference to roll out his bill, which would also increase income and sales taxes to replace the estimated $15 billion that state property owners currently pay.
“If we don’t resolve this problem this session, it’s not going to end,” Ryan said.
The plan would establish a 1.85 percent local income tax, on top of the Pennsylvania’s current 3.07 percent income tax. Ryan’s plan also calls for a 2 percent local sales tax, on top of the current 6 percent state sales tax.
Both of these new funding streams would go directly to schools without entering the state government’s coffers.
Most controversially, the plan also calls for a nearly 5 percent tax on retirement income — 3 percent of which would go to the state, and 1.85 percent to schools.
The latter proposal has been the subject of pushback from retirees — a large chunk of the anti-property tax movement — and other lawmakers. Sen. Mario Scavello, R-Monroe, a vehement property tax opponent, told Ryan at a hearing last week that he “cannot vote to tax seniors’ pensions.”
Ryan has countered that the plan would not tax Social Security payments, only pension or 401k earnings. It would not tax individual contributions.
Pennsylvania is one of 10 states that does not tax retirement income.
Ray Landis, the AARP’s state advocacy coordinator, said at last week’s hearing that the leading senior group hasn’t taken a position yet on a retirement tax. He also acknowledged it might become a necessity as the state’s population ages.
This isn’t the first time in recent memory that a tax on retirement income has become a political football.
Former GOP gubernatorial candidate Scott Wagner was hammered in both his successful primary and unsuccessful general election 2018 campaigns for comments he made in 2016 that seemed supportive of a tax on pension income.
Under the new funding system, schools that couldn’t cover their debt would immediately enter state financial oversight, Ryan said Tuesday. Districts that enact a property tax after the bill’s passage would lose all state education funding.
Ryan also suggested that his bill would likely lead to school district consolidation. Pennsylvania currently has 500 school districts spread across its 67 counties.
Typically, seniors are at the center of the conversation around property tax elimination.
A 2017 estimate from the Independent Fiscal Office, a state fiscal watchdog, projected that people 60 and older pay 44 percent of all property taxes.
But Blake Ringenberg, a licensed professional counselor in Mount Joy, said at Tuesday’s press conference that there should be more focus on kids.
As a counselor, he has talked to children in families who have lost homes because of unpaid property taxes.
Ringenberg said a home is a place of sanctuary, especially for a young, maturing child. If forced to leave, a child might not be able to cope with the stress of leaving their home.
“I think it’s very important we do everything we can to provide kids their own environment, their own safe place, and not make that something we can take from them,” Ringenberg told the Capital-Star.
According to Ryan, between 10,000 to 18,000 homes are sold in property tax foreclosure sales in the commonwealth each year.