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September 25, 2013 | By | Posted in General News

Business, industry groups come out against property tax shift plan

By Melissa Daniels | PA Independent

CAPITOL RALLIES: An outdoor rally for HB 76 drew a crowd of around 200 on Tuesday, but business groups oppose the effort.

HARRISBURG — Property tax elimination and reform proposals are an early focus of this fall legislative session, something plenty of tax-weary homeowners may be happy to hear is on the horizon.

Pennsylvania’s largest and loudest voices from the business community, though, are urging lawmakers to slow down and reconsider.

A letter sent to all members of the state House of Representatives from business- and industry-specific associations and lobbies asks for a delay in considering House Bill 1189, a proposal to allow school districts to eliminate property taxes by levying earned income taxes on residents, and business privilege and mercantile taxes on businesses.

Alex Halper , director of government affairs for the Pennsylvania Chamber of Business and Industry, said the taxes proposed in HB 1189 especially may harm businesses that rent or lease locations and aren’t already including property taxes in their overhead expenses.

“For a lot of employers whose tax liabilities don’t include property taxes, or property taxes are even a small portion of it, this has the potential to be one of the largest business tax increases in years, or really in decades,” Halper said.

One of the taxes, a mercantile tax, is applied gross income before any other taxes or deductions, regardless of profit.

The other, a business privilege tax, is applied to any business operating in the school district’s borders. That tax already is levied by some municipalities in Pennsylvania. But, Halper said, its application has been an issue for the state chamber, like when a business — say a construction project — is doing business in the district temporarily and still subject to the tax.

Halper said he is also concerned the taxes ultimately could be higher than existing property taxes.

“As long as there are so many unanswered questions and this ambiguity, it’s very difficult to get a handle on a tax shift like this, what it would mean,” he said.

Rep. Seth Grove, R-York, the main sponsor of HB 1189, said earlier this week that lawmakers considered the effect on businesses when examining the bill in the House Finance Committee. To limit the burden, the bill was amended to ensure just 50 percent of a school district’s tax revenues can come from taxes on businesses. And, he said, there are already Department of Education limits in place on how high taxes can be raised.

“Once property taxes are eliminated, the elimination tax can be raised to fund general government operations in school districts is limited to the current Act 1 index,” Grove said. Those indexes, he said, have kept property tax increases under 3 percent.

At this point, though, the business and industry lobby has more than HB 1189 to worry about.

The coalition also oppose the Property Tax Independence Act, the elimination proposal from Rep. Jim Cox, R-Berks, and Sen. Dave Argall, R-Schuylkill, among others. That proposal replaces property taxes with increases in personal income and sales taxes, a move the coalition says would negatively businesses by increasing prices.

Hartler said the groups would prefer to see cost-cutting measures at the local level, like prevailing wage reform.

“This coalition does not want anyone to lose his or her home to taxation,” reads the letter. “However, we do not have enough information to truly understand how H.B. 1189 will be implemented and what the consequences will be for individuals and businesses. Despite our often-distinct differences we share this common concern, and we therefore urge you to not support House Bill 1189 and House Bill 76.”

Those signing the letter include:

  • Pennsylvania Chamber of Business and Industry
  • Pennsylvania Manufacturers’ Association
  • Pennsylvania Retailers’ Association
  • National Federation of Independent Business
  • Pennsylvania Food Merchants Association
  • Manufacturer and Business Association
  • Pennsylvania Bar Association
  • Philadelphia Bar Association
  • Pennsylvania Newspaper Association
  • Broadband Cable Association of Pennsylvania
  • Pennsylvania Petroleum Association
  • Pennsylvania Defense Institute

Contact Melissa Daniels at melissa@paindependent.com

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Melissa Daniels is a reporter for PA Independent. She can be reached at 717-350-0962 or Melissa@PAIndependent.com

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