Pennsylvania’s property tax, explained: A moral wrong, or the building block of government finance?

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When he started knocking on doors during his inaugural campaign for state representative in 1992, Sam Rohrer noticed a topic popping up again and again — property taxes.

He was aware of complaints, but the extent of the problem became more and more apparent as he talked to his soon-to-be constituents in Berks County.

Rohrer, a Republican, served in the General Assembly until 2010 and became one of the body’s strongest advocates for property tax reform. In those 18 years, he tried negotiating with such Capitol power players as former GOP House Speaker John Prezel to bring elimination up for a vote — to no avail.

He even ran unsuccessfully for the GOP nod for governor in 2010 against then-Attorney General Tom Corbett on a Tea Party platform that included property tax elimination.

Now out of office, and president of the Elverson, Pa.-based American Pastors Network, Rohrer doesn’t follow the issue as closely as he once did. But he knows what it’ll take to finally see it through.

“Somebody has to be a champion of the cause,” Rohrer said. “They have to be dogged.”

Millions from mils

Every state has some form of property taxes to cover services. In Pennsylvania, counties, local municipalities, and school districts collect these taxes for education.

According to Wallethub, effective rates range from just over a fourth of a percent of a home’s value, in Hawaii, to 2.44 percent in New Jersey. 

All told, Wallethub estimated the average Pennsylvanian pays a tax of 1.58 percent of their home’s value annually. That’s the 11th highest in the nation, among the 50 states and Washington, D.C.

Typically, the tax works something like this: A government entity assesses a price for each piece of property you own. As your home becomes bigger or better, the assessment increases.

Your property tax payment is then determined by applying a tax rate to the assessment. That number is known as the millage rate and is set by the taxing body, such as the school board.

One mil represents one tenth of a cent. So for each $1,000 of property value, you’d pay $1 in taxes. 

Those mills can add up. According to Wallethub, the annual taxes on a median priced home in the Keystone State are $2,691.

As anti-property tax advocates will note, the levy has its roots in the 11th century, from English feudal dues, according to the Atlantic. 

The king owned all of the kingdom’s land, and each noble had to pay the king for the right to inhabit the land. In return, they gained his protection. The practice was continued in America under royal charters that established all 13 original colonies.

But despite the anti-nobility sentiment of the American Revolution, the tax has endured for one compelling reason: It’s a money-maker.

In the 2019-20 fiscal year, property taxes will bring in an estimated $15.28 billion for  Pennsylvania’s 500 school districts, according to the Independent Fiscal Office.

What do critics say?

Rohrer lays out a simple argument against property taxes.

“I believe it is, primarily, not a political issue. It is a moral issue,” Rohrer told the Capital-Star. “And it is a moral issue and constitutional issue because people’s property are an extension of themselves.”

As Rohrer and other opponents see it, the tax represents a heavy and unfair burden on residents, especially retirees or anyone on a fixed income.

A 2017 estimate from the IFO projected that people 60 and older pay 44 percent of all property taxes in Pennsylvania.

Because the tax is charged each year, the burden remains the same even if someone has stopped working.

Someone could buy fewer goods to pay less in sales taxes, or manage their salary or hours to pay fewer income taxes.

But the only way to lower one’s property taxes tax is to sell your property and move into a smaller home — or to rent. To Rohrer, that flies in the face of property rights. 

Since a failure to pay property taxes means losing one’s home, Rohrer believes an individual does not truly own their own property, but rather just rents it from the government.

Elimination advocates point to tax sales of between 10,000 to 18,000 properties a year.

A steady funding stream

But others, such as George Dougherty, a professor of public finance at the University of Pittsburgh, defends the property tax as a consistent — and often progressive — way to pay for government services.

Home values can generally serve as a proxy for a wealth tax, Dougherty said. Property values also stay relatively steady from year to year, and don’t oscillate with the economy, unlike sales or income taxes.

With property taxes, local governments “have a pretty good idea how much money [they’re] going to bring in every year,” Dougherty said. 

That means the number of teachers, miles of roads paved, or level of law enforcement doesn’t have to decrease just because the economy tanks, he added.

This is especially key for schools.

According to the Pennsylvania School Boards Association, the state’s share of education funding is among the lowest in the U.S..

Right now, the state pays for 38 percent of the costs of public education through General Fund revenue. The rest is covered by local governments and school districts, mostly through property taxes.

“This lack of state investment is troubling,” PSBA said on its website. “Asking districts to continually generate greater resources at the local level only serves to expand the inequities of the current system and widens the gap between poor and affluent school districts.”

‘Eliminate, eliminate eliminate’

Rohrer is a purist and sees only one option — get rid of all property taxes, as soon as possible.

“I’m going to fight for elimination,” Rohrer said. “Eliminate, eliminate, eliminate. Otherwise, you let that seed grow and you gotta cut the head off it [again].”

Elimination comes with a cost: $15 billion in revenue for local governments. One of the most talked about proposals is SB 76, sponsored by Sen. David Argall, R-Schuylkill. It was his measure that was voted on, and failed, in the state Senate in 2015.

His bill calls for an increase in state sales tax from 6 to 7 percent as well as expanding the tax to more items. The legislation also calls for an increase in income taxes from 3.07 to 4.95 percent. Together, these increases would replace local school funding.

Rep. Frank Ryan, R-Lebanon, has also proposed adding a retirement tax to the mix to replace property taxes, which has received a frosty reception.

Argall’s proposal wouldn’t eliminate property taxes entirely; instead it lets districts keep property taxes to pay off debts accrued under the old funding system.

As PublicSource, a Pittsburgh nonprofit newsroom, reported in 2017, such a setup could mean that many school districts see their property taxes remain, just at some slightly decreased level, as income and sales taxes increase.

Home, sweet homestead

In 2017, Pennsylvania voters approved a constitutional amendment that allows the Legislature to pass a bill to effectively eliminate property taxes on homesteads and farmsteads. 

Under state law, a homestead is defined as an individual’s primary dwelling. A farmstead can be claimed by a farmer on their home and up to 10 acres that is used for agricultural purposes. 

The 2017 amendment builds upon one voters approved in 1997 that reduced the assessed value of a primary residence. For most property owners, that translates into savings of a few hundred dollars a year. 

So why do you still pay property taxes? Because the 2017 amendment isn’t funded.

According to an IFO estimate, it comes with an $8.5 billion price tag. 

Enter Rep. Pam Snyder, D-Greene, who is sponsoring a bill that would take advantage of the unused provision. 

Snyder, along with GOP Reps. Marcia Hahn, of Northampton County, and Rosemary Brown, of Monroe County, have proposed increasing state income taxes by 1.8 percent, with revenue deposited into a special account to reduce property taxes.

That fund would allow individuals with a single homestead to stop paying property taxes, without being over-reliant on less stable sales tax revenues to fund something as critical as education, Snyder told the Capital-Star.

“When you say eliminate all property taxes, it sounds good. It’s good rhetoric on a campaign trail,” she said. “You hear it all the time, but you gotta be realistic.”

Snyder added: “Instead of trying to take the whole apple, we’re trying to take a big bite of the apple.”

The proposal could prove an easier sell to opponents of elimination, who point out that getting rid of property taxes wouldn’t solely benefit elderly Pennsylvanians living out their lives in the family home.

Elimination would also provide a significant tax break to big businesses that own large swathes of property. An earlier estimate from the Pennsylvania Association of School Business Officials put the tax break to businesses from elimination at $2.75 billion.

Rohrer opposes progressive taxation. A proper policy, he said, should apply equally to everyone.

“As soon as you start making progressive application of taxes, there’s winners and there are losers,” Rohrer said.

What next?

While there have been hearings and press conferences during the Legislature’s summer recess, it’s still a waiting game.

Democratic and Republican lawmakers formed a working group of over the summer to try to informally reach a consensus on a plan.

Mike Straub, spokesperson for House Majority Leader Bryan Cutler, R-Lancaster, said in an email that his boss is “waiting for the recently formed property tax working group to complete its process before taking a position on any of the proposals that are out there.”

“We hope the working group will have some proposals later this fall, but Sen. Argall’s office is leading those efforts.”

Jenn Kocher, spokesperson for Senate Majority Leader Jake Corman, R-Centre, likewise struck a patient tone.

“We have a task force that has been holding hearings and looking at the different options when it comes to property tax reform,” Kocher wrote in an email. “We have not taken a position on a particular bill as we work through this process.”

Wolf spokesperson J.J. Abbott said the executive branch is “open to reforming property taxes,” pointing to proposed property tax relief in the governor’s 2015 budget that was rejected by Republicans.

“[Wolf] looks forward to seeing what the legislative working group comes to consensus on,” Abbott said.

5 COMMENTS

  1. As a former Berks Countian who had the pleasure of serving on a few deliberative bodies with Sam Rohrer, and I consider him a friend, on this issue, I have to say Sam has engaged in some hyperbole. Sam is an altogether fine and decent man, but he does have a tendency to view nearly everything as some moral crusade. In my view, benefitting the demographically richest segments, seniors and corporations, at the expense of young people just getting started, and portraying it as a moral imperative, stands the idea of morality on its head. Property ownership has never been an absolute, regardless of people like Rohrer’s attempts to paint it as such. It is we who are the ephemeral ones. How can the temporary own the truly permanent? No, ad valorum taxation IS the moral approach. Now about those millage rates…

  2. As usual politicians get it WRONG. This is not a moral issue (but, getting emotional about this brings crazies into the picture) it is a financial issue with the state giving tons of cash to under performing districts and substantially less to those that are high preforming and low cost (in some cases). Giving all of the taxes to Harrisburg is now, and will always be a bad choice. A few years ago they could not come up with a budget which sent some districts into more debt then they already had because of the clowns in Hbg. (and the governor at the time) could not agree. Come up with a per student average cost throughout the state (on current spending amounts dealing with transportation, building and grounds, educational expenses, etc.) and make all districts live within their budgets. We have seen what happens when Penn Hills went out of control and spent more then that could possibly pay back. But because of their mismanagement we tax payers are bailing them out with special funds above and beyond their normal allotment. Not one of the board or administration went to jail or were held accountable. WHY? Every time the state gets involved the education of our student suffers. KEEP THEM OUT OF THE LOCAL TAX STRUCTURE AND ALLOW US TO EDUCATE OUR CHILDREN !

    • Broader funding needs to be for All that’s what HB/SB 76. Local control spending is a “Joke ” as a taxpayer door the bills and have no say in how they spend. The only choice is pay the increase or Lien on your home . Who’s children ?

  3. This Commonwealth has aid to each school district basically upside down. The courts should review and correct the inequity as well as permit the consolidation of school districts. Just the retirement system has placed each school district in debt because of past and recent legislatures. The House and Senate races need this factor to come out and our war lords who secured all their power may face reality and have an opportunity to fall on their pointed faces because of their prior handling of the retirement system. How could they make a system to favor employees of all school districts and their representative unions?

  4. The article does what too many articles do. It speaks of “the” property tax. There is no “the” property tax, any more than there is a “the media.” We have three different property taxes: County-level, local-level (city, township, borough, town) and school-level. School level usually accounts for two-thirds or so of the total bill. Taxing property for education makes no logical sense; it is simply a guaranteed money-maker for schools to pay administrators exorbitant salaries. Taxing property for local-level purposes does make sense. Property determines needed levels of police, fire, streets and sewers expenditures. The property tax is directly related to most local government spending. We would get somewhere sooner if journalists would make this clearer, and perhaps focus on the SCHOOL property tax as the one that makes the least sense and/or is logically most replaceable, e.g., during income-earning years is when most people are parents of school-age children.

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