House Republican leadership says priorities lie with spending, trust in government

Editor’s Note: This is part five of our “Capitol Projects” series. Between Election Day and the beginning of the new legislative session in January, this series of special reports will highlight the most important issues facing the General Assembly and governor-elect Tom Corbett. The topics included were chosen for the impact they will have on the citizens of Pennsylvania and were drawn from the campaign promises of our elected officials.

Earlier this year the state Budget Office predicted property owners could expect $772.5 million in revenue relief for 2010 from the Gaming Act of 2004. Even with that target met, Grove City Economics Professor Michael Coulter said there are underlying disparities leaving property owners without options, particularly in rural and older areas compared to newer, suburban areas.

“In some rural areas, the property tax is a crushing burden,” said Dr. Coulter. “It tends to be higher in some of the old center cities, like [in] the city of Pittsburgh. Property taxes are much higher than in surrounding counties.”

Concerns over the property tax range from high rates paid for few services, limited competition between school districts, few other reliable options for municipalities to depend upon, and whether it serves as a membership fee for the community and should just be left alone.

During the elections, governor-elect Tom Corbett’s Democrat opponent Dan Onorato made much of the fact Mr. Corbett voted for a 20 percent property tax increase in Shaler Township – which passed 4 to 3 – when he was a township commissioner. Mr. Corbett took a no-tax pledge as part of his campaign, however, in the face of a potential $5 billion deficit next year.

Property taxes are preferred by municipalities, said Dr. Coulter, because they are easier to predict. But property taxes are also opposed because they are so constant – even with incomes falling, homeowners still find themselves paying the same amount in property taxes, said Dr. Tracy Miller, a professor of economics at Grove City College.

“People resist property taxes during periods when their incomes are going down,” said Dr. Miller. “They feel now would be a time people would be opposed to property tax. Property values are going down, incomes are going down, but people are still paying the tax. Adding another tax isn’t going to get taxpayers upset enough to vote people out of office who don’t reduce their property taxes.”

Steve Miskin, spokesperson for state Rep. Mike Turzai (R – Allegheny), said addressing burdensome property taxes is not on the short schedule for the Republicans next year.

“Property tax is very important to many members in almost every part of the state and it very well may become part of the discussions in the next year, but right now the people have already laid out what the agenda is,” said Mr. Miskin. “We’re going to be working with the governor to push that forward first and foremost. That’s getting spending under control and getting trust back in the government.”

In 2010, $595 million was given out by the state government for property tax relief payments, plus smaller payments which add up to $772.5 million total.

Susan Hooper, spokesperson for the Budget Office, said it is up to each school district how to calculate who receives property tax relief, but every district received property tax relief. On average, property owners in Pennsylvania received $200 for property tax relief, with 2.7 million Pennsylvanians receiving the relief in 2009.

Property tax is calculated by multiplying the value of a property by the municipal millage rate, an established unit equal to one-thousandth of a U.S. dollar. Millage rate formulas vary from county to county.

Another property tax disparity comes from the distribution of homeowners versus commercial property owners in a district or municipality. An affluent suburban area, such as Mount Lebanon School District outside of Pittsburgh, could avoid paying high property taxes because of more property owners and the presence of commercial property owners, and still receive libraries, sidewalks and more public service.

In contrast, a more rural area, such as Moniteau School District in Butler County, which does not have many commercial property owners to draw on, has to levy a higher tax on existing homeowners to cover even minimal public services, such as road paving.

But a single statewide property tax rate would not solve all the problems, said Dr. Coulter.

“There wouldn’t be any difference in rates between affluent suburbs and rural areas that offer fewer services,” said Dr. Coulter. “Some economists don’t mind the property tax because it’s a way that municipalities can compete for residences,” he said.

Alternatives to the current property tax structure have been tried in other states. Michigan stopped school district property taxes and increased the sales tax across the state to cover the difference. Illinois instituted a program where elderly residents can defer property tax payments until after their death, at which point a lien is placed on their home and the municipality can collect the back taxes first.

But neither of those solutions addresses the underlying burden of property taxes in proportion to the services provided or the limited scope of school district competition. The solution of allowing school districts to compete with each other on education is unfeasible because of state and federal mandates which make their programs uniform.

This year has been a particularly difficult one for owners paying property taxes to fund schools and other municipal services, with some owners reporting they are not even receiving the services they pay for.

Last April, residents of Treasure Lake, a private community in Sandy Township of Clearfield County, reported paying more than $1 million in taxes to the township even though they do not receive police or road maintenance. The private community pays for those services – despite paying the township to do them.