The Battle Of Conflicting Numbers

How can various studies using the same numbers all come up with different results?

I’m not saying that all these studies aren’t important or unnecessary when considering any legislation but they should be weighed against each other. The numbers should also be weighed against impact studies of the current system especially in the winners and losers categories to make a determination that defines which policy has the best overall potential for the future of the state.

I have no doubt that in any study to encompass all these aspects, the property tax loses on all counts.  Let’s look at some other findings related to the Pennsylvania School Property Tax.

This post is in response the the IFO report specifically but it does take many other factors into considerations that seems to have been ignored by the latest IFO Report.

Let’s start with this simple graph to show what has happened since 1960 with actual home ownership in terms of homes where the mortgage has actually been paid off. Without the egregious school property tax these numbers would look very different.  Any study of the impact of the tax spread that comes as a result of the passage of HB/SB 76 should include this information.

Image1According to Census Data there are 4,930,053 households in the State. 452,517 of those households are in foreclosure or facing tax liens for a total of 10.89% of households at risk of losing their homes due to foreclosure or liens. The shutdown of the government happened before I could compile this information to include the number actual homeowners in the almost 5 million households in the state so the percentage is actually going to be higher when isolating this data to just home owners.  It is true that not all of these are the sole result of the School Property Tax but can anyone reasonably deny that it is a major contributing factor.

Here’s just a few more stats from the Census Bureau:

The real median household income for Pennsylvania peaked in 2008 at $54,081 and is now $2,851 (5.27%) lower.

The real median Per Capita income for Pennsylvania peaked in 2008 at $29,092 and is now $1,318 (4.53%) lower.

According to the National League Of Cities:

Property tax revenues in 2011 dropped by -3.9% compared with 2010 levels, in constant dollars.

Property tax collections for 2012 continue to register the downturn in real estate values, projected to decline in constant dollars by -2.1%, the third year in a row of year-over-year property tax revenue declines.

Property tax revenues will likely decline further in 2013.

These revenues loses must be made up which will result in higher property taxes in the future but it clearly demonstrates that Property Tax is no longer a stable funding mechanism. Other studies on the decline in Property Tax overall revenue will continue to decrease for as much as 12 years but that depends on the source and long range projections.  Any study that ignores this fails to paint a full picture of the future of Pennsylvania.

According to the same source: Even though we are still lingering in a recession, in 2011 and 2012 city sales tax receipts increased over previous year receipts by 1.6% and 2.4%, respectively.

Their studies also show that tax generated from Income has been flat citing a lack of growth in jobs, salaries and wages.

Now inject 10 billion back into the economy through Property Tax Elimination in the state creating more discretionary spending capabilities by property owners and business and sales tax and income will both increase through purchases and a path to the creation of more private sector jobs.

If you interpret the IFO by considering the above factors this is a win for Pennsylvania. If you do not weigh this information in light of the negative impact claims in the IFO of raising the sales tax by 1% it is very easy to get lost in the negatives and not see the positive impact.

If I’m understanding the report correctly, the IFO projected unemployment numbers are based on current trends under the property tax. If this is true then during the Senate hearings they need to be asked about potential job creation and the impact on those unemployment numbers. More jobs equals more PIT which generates more discretionary spending which creates more sales tax revenue.

Higher Property Tax will have the opposite effect further damaging discretionary spending by property owners far more than any alleged negative impact of a 1% sales tax increase. It will also do nothing to generate private sector job creation.

As the above statistics demonstrate: While the private sector has seen wage freezes and declining property values the burden of the property tax has increased. Yet, during the budget debates in 2011, the State Legislators approved a contract for the largest union in the state that included a 4 percent base pay increase during the next four years and 6.75 percent increases based on the experience and seniority for workers who have been in the union between one and 20 years. Depending on seniority and position, unionized workers could earn a 10.75 percent pay raise during the course of the next four years in a series of smaller annual increases.

This increase only places a higher responsibility on home owners in providing for the necessary funding to pay for those increases at the local level through the property tax. I’m not debating the worthiness of the increase and that’s a discussion for a different day in a different place. But by creating a broader tax spread those increases would be easier to assimilate and place that shared responsibility on all Pennsylvanians.

Again, I am NOT Union Bashing. Just trying to keep this in perspective and focused on the real issue-that is the impact of Pennsylvania as a result of a tax spread for the purpose of replacing the property tax with a sales and income tax to fund education.

The State continues to add to the increasing burden of local property Taxation and if they eliminate the School Property Tax those increases have to be justified through Taxation at the State Level where the legislators do not want to accept responsibility for their own actions by receiving the blame for raising our taxes. By pushing these increases down to the local level they can claim they haven’t raised our taxes and continue to push all the heat on to the school boards.

Until that changes we will never have the serious discussion of the things that need to be done in this state to generate real job growth. The instability of the funding from Property Tax is now being felt by Public Sector Union employees as well as necessary tighter spending controls are resulting in furloughs and reductions of Public Sector Union employees but even those cuts aren’t helping the problem any more.

The spread to a labor (Income) and sales/use (Product) tax is beneficial to the state in stabilizing the economy.  Yes, some will pay more but those people are currently benefiting by the current Property Tax System either through paying a lower percentage of their income to the Property Tax or paying none at all.   When everyone is paying the same percentage rates, taxation becomes uniform and equal.  

An issue has been raised that many seniors who no longer have a PIT and spend very little related to Sales Tax would no longer be funding education.  That is true, but the same will universally apply to everyone.  It is not a specific exemption of seniors who have worked throughout their and paid taxes and are now in retirement.  Everyone will have the same opportunity again reinforcing the uniformity and fairness of such taxation.  They will have paid into the system, just as we are paying into the system now.  Once retired the PIT is no longer there.  It won’t be for everyone else either.

 

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