- The personal income tax from 3.07 percent to about 4 percent;
- The sales tax from 6 percent to 7 percent throughout the state except for Philadelphia and Pittsburgh where the rate would go from 7 percent to 8 percent.
|Increase personal income tax to 4%||$3,460,000|
|Increase sales taxes to 7% (8% in Philadelphia and Pittsburgh)||$1,510,000|
|Expand sales tax base||$4,630,000|
|Slot revenue redirected from property tax relief||$896,000|
|Existing school district debt service payments (to remain responsibility of each district)||$2,275,000|
|Source: State Rep. Jim Cox, R-Berks|
Another $1 billion in revenue would be provided by existing taxes on gambling that defray property tax costs and would be redirected to fund education in the absence of property taxes.
The remaining $2 billion consists of debt payments owed by the state’s 500 school districts and would remain their responsibility, meaning that those with debt may have to maintain a smaller version of property taxes, until the payments are finished.
Cox said it did not make sense for state taxpayers in general to pay off debt for local school districts usually resulting from recent construction projects.
“They will have to retain the responsibility for that debt,” he said.
The estimates with which he is working are likely to change when the state Department of Revenue and House Appropriations Committee analyze the bill, he said.
Unlike the plan unveiled last week by state Rep. Seth Grove, R-York, and primarily backed by the York County delegation, the second proposal is being pushed by a pair of Berks County lawmakers and — at least so far — seems to have collected more support from both sides of the aisle.
State Rep. Tom Caltagrione, D-Berks, said Thursday that he has pulled together at least 20 members of his caucus in support of the bill, though those numbers are unofficial until the bill is introduced.
Property tax reform is not a new project in the state Capitol, and earlier attempts to address the system generally have been defeated. While most lawmakers support the concept of property tax reform, there has never been consensus on what changes to make.
The Pennsylvania School Boards Association, or PSBA, which represents school districts in the state, supports the idea of broadening the taxes that fund education.
Pennsylvania is more heavily dependent on local taxes to fund education than most states, said Dave Davare, director of research for PSBA.
“This over-reliance on local school property tax by the state ensures that school districts have nothing to fall back on and are forced to rely on increases in property taxes to generate the dollars necessary to fund school programs,” Davare told the House Finance Committee last week during a hearing on Grove’s proposal. “The over-reliance on school property taxes is also the primary cause of funding inequity among school districts.”
Grove has said his plan will succeed where others have failed, because it allows each county and municipality to find a solution that works — and what works for one area of the state may differ from what other parts might need.
Grove's bill only would allow counties or municipalities to impose a local option sales or income tax to defer at least 30 percent of their local property tax burden. Voters would be allowed a referendum on the sales tax increase, but not the income tax hike.
But opponents of that approach believe the local option could perpetuate or worsen the inequity in the property tax system.
For example, Montgomery County could benefit from a 1 percent additional sales tax because of the King of Prussia Mall, the largest retail complex in the state, which attracts shoppers from Philadelphia and several neighboring counties. Those out-of-county shoppers would be contributing an additional 1 percent sales tax to defer Montgomery County’s property taxes, but that would do nothing to help their own property taxes.
David Baldinger, a leader of the Pennsylvania Coalition of Taxpayer Associations, which includes more than 60 local taxpayer advocacy groups, said a local option sales or income tax would benefit counties with more retail and business activity, but would do little for the majority of Pennsylvania counties that are more rural and less populated.
Baldinger said a statewide solution like the one Cox is proposing would be the best way to reform the property tax system.
“The funding needs of schools are, in general, far less diverse than those of counties and municipalities and can be addressed more efficiently and more equitably at the state level while still maintaining local control of curriculum and spending decisions,” Baldinger said.
Advocates of the statewide plan point to the fact that the state’s sales tax was introduced — at a rate of 2 percent — in the 1950s to help pay for basic education. The tax since has been increased 300 percent and now is directed to the state’s general fund.
Cox said he hopes the coalition he has spent the last two years building will force House leadership to tackle property tax reform during this year’s budget process.
He compared it to the recently passed Marcellus shale impact fee, which he said was not a priority for all members of the House, but enough gathered momentum behind the issue to get it across the finish line.
Last week, when asked about Grove’s plan, House Majority Leader Mike Turzai, R-Allegheny, said he did not see it as part of the budget.