Pa Property Tax Reform And SB76 — Property Tax Independence Act introduced in the Pennsylvania legislature by State Rep. Jim Cox And State Senator Dave Argall in March 2013. It is also known as SB76, SB 76, HB 1776
SB 76 as of 2017 will eliminate all property tax funding for schools — with some exceptions for districts with long-term debt –and replace it by increasing the state sales tax 1 percentage point and the state income tax 1.88 percentage points.
SB 76 Fails To Ease Tax Burden — Lisa Esler, who is one of our favorite people and is a Penn Delco school director, had a 14-minute interview, today, Nov. 30, with Gunther Rewind concerning SB 76. The proposed legislation would prohibit homes from being taxed to fund schools.
Lisa notes that this reform does not solve the tax burden issue and that state legislature is not interested in taking the simple, commonsense steps necessary to do so.
She says the prevailing wage mandate increases construction and maintenance projects between 10 and 30 percent and should be simple to repeal with an honest government. She notes unnecessary state mandates such as paid teacher sabbaticals. She points out the crushing $70 billion-and-rising pension shortfall. She mentioned how the right to strike by teachers inevitably means tax increases.
And while nobody should be taxed from their home, Lisa is 100 percent correct that Harrisburg is not serious about fixing things.
Property Tax Referendum Explained — The Republican State Committee has distributed an explanation of the Nov. 7 ballot question on whether school districts may exempt homes from property taxes.
We are republishing it. Hat tip Donna Ellingsen.
Chairman’s Update
Dear State Committee Members:
This November, there will be a referendum on the ballot that could shape the future of Pennsylvania’s property tax system. Below I have included a research packet with information of the referendum along with background references.
The referendum, which would amend the PA Constitution, could allow for significant reductions in property taxes. I encourage you to education your voters about this referendum and to use this as an opportunity to bring conservative voters to the polls, which will help our whole ticket.
As always, please reach out to me with any questions or comment.
Sincerely,
Val
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Research Packet | 2017 Property Tax Ballot Referendum
TOP LINE: A November ballot question will ask voters whether local taxing authorities should be able to exempt residents from paying property taxes on their homes.
What would the ballot question do?
Nothing would change immediately if the ballot question passed in November.
School districts, counties & municipalities would have the option to exempt taxpayers’ primary residences from property taxes.
Note: commercial and industrial properties would still be taxed if a local government or school district enacted the exemption.
Under current law, taxing authorities can choose to exempt taxpayers from paying up to 50 percent of the median assessed value of all homes.
The proposed change would expand that exemption, making it possible for local governments to exempt ALL taxpayers from paying ANY property taxes on their primary residence.
The official text of the ballot question:
“Shall the Pennsylvania Constitution be amended to permit the General Assembly to enact legislation authorizing local taxing authorities to exclude from taxation up to 100 percent of the assessed value of each homestead property within a local taxing jurisdiction, rather than limit the exclusion to one-half of the median assessed value of all homestead property, which is the existing law?”
Why is the ballot measure being championed by lawmakers?
As reporter by the Philadelphia Inquirer:
Rep. David Maloney, R-Berks, who sponsored the bill that created the ballot question, said he receives weekly — and sometimes daily — complaints about property taxes from his constituents, especially those who are retired and live on fixed incomes.
“I had an elderly lady walk into my office unexpected,” he said. “She pulls out her property tax bill out of her pocketbook and said, ‘Sir, I can no longer pay this. Do you know how to help me?’ ”
Background information of property taxes:
In Pennsylvania, systems in place for property assessments and distributing school funding have sparked additional complaints about the real estate tax system.
Currently, property owners pay tax rates set by their county, school, and municipal governments.
FACT: School taxes account for the largest share of property-tax bills, and Pennsylvania’s school-funding system has long been criticized.
How do Pa. property taxes compare with other states’?
Statewide, property tax collections account for about 30 percent of local and state tax revenue, according to a study by the Tax Foundation.
Our tax rates are among the HIGHEST in America; Pennsylvania homeowners pay, on average, 1.46 percent of their home value in taxes, according to another Tax Foundation report, which ranks the state 10th nationwide for the highest effective tax rate. New Jersey, by comparison, has the highest effective tax rate of any state, at 2.44 percent.
***Pennsylvanians pay about $14 billion a year in school property taxes alone***
Opposition:
Pennsylvania Association of School Business Officials
Jay Himes, Executive Director
Mr. Himes has said his group thinks the option to eliminate property taxes for primary residences is a good idea — as long as a sound revenue replacement is found.
But Mr. Himes and his association strongly oppose the Property Tax Independence Act and efforts to eliminate the school property tax. Under that bill, school districts would continue charging for property taxes to cover their existing debt until it is paid off, and county and local property taxes would remain the same. That would lead to even more unequal payments for homeowners depending on their school district, Mr. Himes said, and would not be total elimination of the tax.
School officials also oppose the loss of local school board control over education funding under proposals to eliminate the school tax.
“We don’t have a perfect tax system in place for school districts and we haven’t had one for decades,” Mr. Himes said. “It, however, is an inordinately complex and difficult issue because otherwise we’d of had a solution by now.”
Events on the horizon:
If the ballot measure is adopted by Keystone State voters, the legislature would need to find alternative sources of revenue before taxing authorities could move forward with enacting property tax exemptions.
Advocates for the Property Tax Independence Act say that the referendum could help them achieve the elimination of school property taxes.
Sen. David Argall, R-Schuylkill, is the prime sponsor of that effort, which has attracted support from both Democrats and Republicans. It was defeated after Lt. Gov. Mike Stack broke a tie vote on it in 2015.
As reported by the Philadelphia Inquirer:
Mr. Argall said he is open to amendments to his bill, which still lacks enough votes to pass. If the measure passes this fall, for example, he could amend his bill to eliminate school property taxes only for primary residences rather than all properties.
“It gives us more flexibility,” Mr. Argall said of the ballot question. “I believe it helps us to build some additional support for the concept across the state.”
SB-76 Topic Of Delco Town Hall — HB/SB-76 — also known as the Property Tax Independence Act — will be the subject of a Town Hall, 7 p.m., Sept. 14, at the Marple Library, 2599 S. Sproul Road, Broomall, Pa. 19008.
The bill will eliminate all property tax funding for schools — with some exceptions for districts with long-term debt –and replace it by increasing the state sales tax 1 percentage point and the state income tax 1.88 percentage points.
Property Tax Amendment On Nov. 7 Ballot — An amendment to Pennsylvania’s constitution will be up for approval, Nov. 7, that may make debate about a state-wide ban on school property tax moot if it should pass.
Existing law now caps the exclusion at 50 percent.
Implementation would require the General Assembly to pass enabling legislation to establish guidelines for local jurisdictions to follow if the amendment should pass.
After much debate and discussion on Monday in the Senate caucus, Senator Dave Argall later on the Senate floor offered an amendment to House Bill 683 that contained language that was similar to the language in Senate Bill 76.
The amendment was voted on by the full Senate – the vote was 24 – yes votes ( 18 Republicans – 6 Democrats ) and 24 – no votes ( 12 Republicans – 12 Democrats) – Lt. Governor Stack cast the tie breaking vote of no – so the amendment failed.
While the no vote might be viewed as a defeat – I see progress – # 1 – the issue of school tax elimination made its way to the Senate floor for a vote – I personally, along with other Republican Senators, had many unanswered questions but I voted yes to get the ball on the field – I give our Senate Majority Leader Jake Corman credit for allowing the amendment to the Senate floor for a vote – # 2 – I am reaching out to many of the Republican Senators who voted no to ask what their concerns and reasons for voting no were.
The reasons for the no votes by some of my Republican colleagues are understandable and deserve a chance to be addressed.
Some of the reasons I heard from my colleagues who voted no on the bill were as follows:
– No cost containment is taking place in the schools – increasing wages and benefits, not tied to CPI Index
– Cannot support raising the sales tax to 7% when their Senate district borders Delaware where there is zero sales tax
– Issues with how the funds controlled by the state would flow to their school districts
Another large issue is the current “Hold Harmless” agreements– this means no school district would receive less funding next year than they received the previous year – some school districts are receiving $8-10,000 per student and some districts receive $20-25,000 per student – we need to completely rework the funding formula.
I am fully aware of the school property tax burden on many working families – I am also a private sector business owner.
When I received the tax rates proposed in the amendment on Monday I did a back of the napkin calculation of what the increased personal income tax and sales tax would cost my company and me – the result would be a minimum of $200,000 per year (personal income tax and sales tax) – I am watchful of how the new taxes that are intended to eliminate school taxes on real estate would also impact businesses.
My calculation for the increased taxes my company and I would pay are the gross taxes that would apply – we would see eliminated school taxes of approximately $60,000 on our various properties, which I would deduct from the additional taxes, but at the end of the day the increased tax impact would be in the $140,000 per year range – I am also aware that any additional sales tax that my business would pay would be deducted as a business expense and would reduce our federal tax liability.
For readers who understand different tax categories, my company is a Sub-S Corporation so pass through income would be taxed at the higher rate.
I can assure you of this point – the “Property Tax Ball” is out on the field and is not going away – until it gets resolved.
This past April I circulated a memo proposing a piece of legislation called the “Taxpayer Fairness in Compensation Act” asking for co-sponsors.
This week has been busy with many people visiting my Senate office in Harrisburg and many emails received regarding Senate Bill 76 – The Property Tax Independence Act.
If SB76 is passed it would eliminate school taxes on all real estate.
To be clear – local county and municipal taxes would remain in place.
The elimination of school taxes would apply to all real estate in Pennsylvania – residential, commercial and industrial.
To completely eliminate school taxes on real estate in PA the legislature has to find between $12-14 Billion Dollars of revenue from other sources.
Other sources mean new taxes, increased taxes, and lifting exemptions on goods or services not currently taxed.
There is no free lunch – money is not falling out of the sky – so everyone has to have realistic expectations.
I have been a private sector business owner for over 35 years and I learned over 20 years ago this bit of wisdom from a business associate – “Begin with the end result in mind.”
So here is how we begin the task of eliminating school taxes on real estate – we have to identify the actual dollar amount that is needed to cover the school tax elimination – that is the easy part.
Here is the hard part of SB76 – we currently have 500 school districts in PA – each school district has a school board – to be clear there are 500 different school boards that are comprised of volunteer board members.
Each school district negotiates teacher contracts for wages and benefits without any input from the legislature.
Currently there are many school districts renewing teacher contracts with annual salary increases of anywhere from 2% to 3.5% increases – these increases are being given in a period when the CPI index is less than 1%.
The private sector business world is seeing dramatic health insurance increases – in the private sector it is customary for employees to pay for between 20% and 30% of their monthly health insurance costs.
In the Philadelphia School District teachers pay zero toward their health insurance – many teachers throughout PA pay a lower percentage toward their monthly health insurance costs than private sector workers.
We still have not fixed the pension crisis in PA.
Prevailing wage mandates are still required for construction and maintenance projects at school districts.
In my own school district in York this past summer the school district replaced roofs on several buildings – the school finance director requested two bids to replace the roofs, the first bid required using prevailing wage labor and the second bid did not require prevailing wage labor.
The prevailing wage labor price was $2.8 Million Dollars – the non-prevailing wage price was $2.2 Million Dollars a difference of $600,000 – Six Hundred Thousand Dollars – the district had no choice but to award the contract using mandated prevailing wage labor.
I call school districts the “Hungry Monster” that needs to be put on a diet – until we solve salary and health insurance increases – SB 76 will be a disaster – we MUST get school costs under control first.
Another very large issue with school boards is that I estimate that between 25% and 50% of volunteer school board members are married to a teacher, have a son or daughter who are teachers, the board member may be a teacher at another school or the board member may have been a former teacher – My point is that there is a large amount of conflict on school boards – these conflicts must be resolved and eliminated.
The conflict of interest on school boards is similar to the fox guarding the chicken coop.
So here is the dilemma that I face when voting on SB 76 – have spiraling costs been contained or eliminated – and where is replacement revenue coming from?
Here is another bit of wisdom I heard over 20 years – “Align your expectations with reality.”
In reality the SB 76 issue is front burner for everyone – it must be done correctly or three years from now what was a good intention will explode.
That leads me to my closing comment – “I am a person that will tell you what you need to hear – not want you want to hear.”
SB 76 must be done with great thought, planning and precision – My colleagues in the Senate are committed to getting this issue to the finish line.
I intend to vote for SB76 but it is important that it be done properly and not just jammed through.
State Sen. Scott Wagner (right) with Joe Gale who is a candidate for Montgomery County Commissioner
State Sen. Scott Wagner (R-28) compared Pennsylvania to the Titanic with disaster just ahead at tonight’s (April 6) meeting of the Delaware County Patriots.
About 100 persons attended the event which was held at the Knights of Columbus hall in Newtown Square.
“The ship is going down and we got to do something about it,” Wagner said.
He was referring to Pennsylvania’s fiscal crisis driven by out-of-control state pensions and spiraling property taxes.
He blamed the cause on corruption giving special scorn to those on his side of the aisle. Wagner, who started three successful businesses in York County that now employ 600 persons, described how GOP leaders would hit him up for money at campaign time and that he would write ever bigger checks. Yet, he noted, the simple things that should have made life easier for himself and his employees never seemed to happen.
“They weren’t taking care of you,” he says. “They were taking care of themselves.”
This inspired him to seek office and in a special election on March 18, 2014, he ran a write-in campaign to fill the remainder of the term left vacant by late State Senator Mike Waugh. It was the first time a write-in candidate won a state senate seat. Wagner got 10,595 votes (47.7 percent), while the endorsed Republican nominee received 5,920 votes and Democratic nominee got 5,704.
He won an election to a full-term in November.
Wagner notes that in the private sector pensions rarely reach 40 percent of the working pay. He said in the public sector in this state it is approaching 80 percent. He notes that average pay for a teacher in his school district is $88,000 for 180 days of work and they can look forward to getting $75,000 per year for the rest of their life upon retirement. This would be at age 60 after 30 years, or earlier after 35 years.
He said that it angers him to see soldiers coming home from overseas in wheelchairs missing limbs knowing they could look forward to $800 per month in benefits when retired teachers would be getting over $6,000.
He said if things don’t change benefits and wages would soon be dollar for dollar.
“If Pennsylvania could file for bankruptcy, I’d be the first to prepare a bill,” he said.
Wagner proposed specific solutions. He said abolishing the prevailing wage mandate that requires wages for public works projects be set by the union-dominated Department of Labor and Industry rather than the market would save school districts between $200 million and $300 million annually.
He said he will not vote for a state budget unless the state gets rid of prevailing wage.
Wagner is also pushing to turn the state pension programs into 401K defined contribution types rather than the existing defined benefit packages.
He said he is also working on ways in which force give-backs in the existing benefits package.
A related issue that he is also trying to address is the cause of the corruption that led to this crisis.
He noted that he has been targeted by Pennsylvania AFL-CIO leader Rick Bloomingdale for his push for paycheck protection for union members. He said that about $750 annually is automatically deduction from each union member’s paycheck with the members having little say for which causes the money should be used.
The state’s AFL-CIO has about 800,000 members, so that’s about $600 million that winds up supporting not-so-pro labor causes like opening borders and stopping pipelines.
Wagner pointed out that Bloomingdale’s salary is over $300,000.
Wagner mentioned that he had a recent lunch with presidential hopeful Wisconsin Gov. Scott Walker who was notably successful in stopping union corruption in his state. Wagner said the big difference between Wisconsin and Pennsylvania is that unlike in Pennsylvania, Wisconsin Republicans did not get any union money.
“Eighty percent of Republicans take money from unions,” Wagner said.
Wagner said he is far from making an endorsement but that he likes Walker
Wagner said that he is pushing for the sale of the state’s liquor stores.
“State liquor stores aren’t making the kind of money people think they are,” he said.
In a bit of irony, Wagner is now running the Senate Republican Campaign Committee which so bitterly fought him a year ago. He said that he has his eye on several Democrat seats in the western part of the state and expect to flip four or five to the GOP in 2016. The Republicans now hold a 30-20 lead in the body but Wagner notes that four or five from the Philadelphia suburbs often end up supporting the Democrats.
It was rather daring that Wagner would make his speech on his adversaries’ turf.
Wagner did have some nice things to say about Dominic Pileggi (R-9) who he was instrumental in removing as Senate Majority Leader earlier this year.
“I think he’s a brilliant guy,” he said.
He said Pileggi’s weak spot was that his training as a lawyer kept him from seeing the steps needed to save the state.
Pileggi is running for election as a Common Pleas Court judge this fall and would leave his senate seat if he should win as expected. Wagner said he expects a more conservative senator to replace Pileggi.
Wagner got some grief in the question period regarding his support for SB 76, a bill that was tabled last fall and would have replaced the property tax with either an income or sales tax to fund schools. Many members in the audience said they feared it would mean the end of local control of schools. Wagner said the bill was not perfect, is not likely to pass as is, and needs further work.
He said property tax relief is desperately needed, however, and SB 76 gets things moving.
Wagner said he does not expect a state budget to be passed until October. He said any claims that the government is going to shut down are “bullshit” a word he repeated several times. He noted that the state is still going to be collecting taxes whether the budget is passed or not.
Also at the meeting was Philadelphia Common Pleas Court Judge Paul Panepinto who was seeking support for his independent run as a state Supreme Court judge. Judge Panepinto needs 17,000 signatures by July to get on the ballot. He recently made headlines for fining lawyer Nancy Raynor $1 million for her behavior during a medical malpractice case.
Wagner gave him a ringing endorsement calling him the “real deal”.
The Pennsylvania Senate Finance Committee, Sept. 16, approved the Property Tax Independence Act (Senate Bill 76), marking the first time the proposal has earned a positive vote from a legislative committee, says State Rep. Jim Cox (R-129).
Cox along with Sen. Dave Argall (R-29) introduced the bill in March 2013.
The legislation would completely replace school district property taxes through an expansion of the sales tax to include some currently exempt items, an increase in the sales tax rate and an increase in the state income tax. The sales tax would increase by one cent for every dollar spent on taxable items and the income tax would increase by a little more than one cent on every taxable dollar earned.
“This week’s vote was certainly a victory for everyone involved in this movement,” Cox said. “It marks the first big step in a long legislative process. This is a success we can build upon as we move forward”
The Senate Finance Committee has scheduled a public hearing 9:30 a.m., Wednesday, April 30, in Hearing Room 1 of the North Office Building in the state Capitol to consider the Property Tax Independence Act (Senate Bill 76), reports state Rep. Jim Cox (R-129).
A rally is scheduled for 11:30 a.m. on the front steps of the Capitol to show support for the bill.
