Saboteurs of Property Tax Independence!

The original usage of the word sabotage was in a context of a deliberate attempt to destroy or damage property to advance an issue or cause. According to dictionary.com it is derived from the French, and at first in English, in the sense of “deliberately and maliciously destroying property” originally was in reference to labor disputes, but the oft-repeated story (as old as the record of the word in English) that the modern meaning derives from strikers’ supposed tactic of throwing shoes into machinery is not supported by the etymology. Likely it was not meant as a literal image; the word was used in French in a variety of “bungling” senses, such as “to play a piece of music badly.” This, too, was the explanation given in some early usages. Dictionary.com then cites an example from a 1907 publication which used the word sabotage.

SABOTAGE: The title we have prefixed seems to mean “scamping work.” It is a device which, we are told, has been adopted by certain French workpeople as a substitute for striking. The workman, in other words, purposes to remain on and to do his work badly, so as to annoy his employer’s customers and cause loss to his employer. [“The Liberty Review,” January 1907]

In 1910 the word was interpreted in the following context: In English, “malicious mischief” would appear to be the nearest explicit definition of “sabotage,” which is so much more expressive as to be likely of adoption into all languages spoken by nations suffering from this new force in industry and morals. Sabotage has a flavor which is unmistakable even to persons knowing little slang and no French …. [“Century Magazine,” November 1910]

As I see what is happening in the House of the Pennsylvania General Assembly, I can’t help but feel that the world “sabotage” applies when it comes to the legislation that would eliminate the School Property Tax. Over the last 2 years we have seen repeated attempts in the house to misrepresent the legislation (SB/HB 76) as well as to promote intentional misinformation about the bill. As reports came forwards demonstrating the validity and need for such legislation those reports were intentionally skewered in their attempts to kill the bills.

The most egregious and obvious attempt of sabotage came in the form of Seth Grove’s HB 1189 which was touted as an elimination bill when it was obviously not an elimination bill. It was a bill that would have expanded the school districts taxing authority, leaving the property tax in place, which would have only exacerbated the problem for homeowners in the state, not alleviated it.

Where HB 76 had to go through a lengthy vetting process of being scrutinized every step of the way, HB 1189 flew through the House like the middle of the night pay raise that had so incensed many Pennsylvanians. There would be no real hearings, no studies, no cost analysis, no economic impact data.   When an attempt was made by some in the House to stop HB 1189, those legislators were ridiculed and an unreleased report was intentionally misrepresented to do everything in their power to stop the advancement of HB 76. To make matters worse, when that handful of legislators in their support of HB 76 took a stand one legislator took to the floor and asked the question “How will we pay for the pensions?”.

That question should have been rephrased to more accurately represent what that legislator was saying….”How else will we make the homeowners of Pennsylvania pay for the pensions.”

The legislators had previously passed an extravagant pension package where the brunt of the cost of paying for these pensions would be forced down to homeowners across the Commonwealth through the Property Tax System. This was especially true in the case of the School Property Tax. As the private sector was watching their own pensions collapse and as the private sector was moving into retirement programs like 401(k)s, our legislators provided for themselves and for public sector union employees a pension scheme that property owners in the private sector were going to have to pay for. It was a pension scheme more grandiose than anything the majority in the private sector could have dreamed of ever obtaining.

As a result, at this point in time there are 167 municipalities in the state that are in pension liability debt with much of that connected to debt in the school districts related to the pension debacle but we are only in the early swell of the coming Pension Tsunami. In that early swell we have already seen more property owners in the private sector forced out of their retirement in order to provide for the retirement of others in the public sector as those property owners attempt to hold on to their homes. For others, this early swell was enough to drown them in personal tax debt so as to be unable to save their homes and, as a result, have lost those homes, all to provide for the retirement of the public sector employees. Sabotaging the American Dream of the property owners who are slowing getting caught up in the inevitable undertow of the coming Tsunami is, according to some legislators, not too small a price to pay so that they can reward the public sector employees with a pension system that cannot possibly keep up with its promises.

The attempts at sabotaging HB 76 in the House should have come as no surprise to us. Home Owners in the State have been screaming for School Property Tax Elimination for 30 years now and the state legislators are the reason that we haven’t seen this real reform legislation move forward.   During that time Property Owners in many parts of the state have seen their School Property Taxes triple, some areas it has more than tripled. Sabotaging HB 76 just seems to be part of a much larger effort to sabotage Home Ownership and players in that game line both sides of the political aisle.

According to census data Pennsylvania is seeing a decline in Housing Units and an increase in vacant homes. Census data from the Pennsylvania State Data Center show a 16% increase in vacant homes in the state which now totals more than 350,000 homes.   Many of these abandoned properties add to the cost of municipalities and become eyesores that drive down nearby property values making it harder to sell those homes but rarely result in a reduction of the assessed value of the property.  At the same time Census data reveals that there is a population exodus out of Pennsylvania showing that from July of 2013 to July of 2014 alone we lost 31,400 people. United Van Lines data supports this, putting Pennsylvania among the top 10 “outbound states”. This is the continuation of a long-term trend: Pennsylvania lost 89,000 to other states since 2010, more than 40,000 from 2000-2009 and more than 250,000 during the 1990s in net state-to-state moves.

When the housing bubble burst property owners in the state saw their cost of living increase while their wages went stagnate. Even though their property worth dropped dramatically, their property taxes kept on increasing based on an assumed worth of property that hardly reflected the reality. In essence, property owners were paying taxes for property they didn’t own. Again, this should not have come as a surprise to any of us since assessed value of property worth for tax collection purposes is often higher than the property owner can actually get for that property in the open market and whenever this happens that property owners has been paying property taxes on property they don’t own.

When the housing bubble burst property owners in the state saw their cost of living increase while their wages went stagnate or, in many cases dropped.  Even though their property worth dropped dramatically, their property taxes kept on increasing based on an assumed worth of property that hardly reflected the reality. In essence, property owners were paying taxes for property they didn’t own. Again, this should not have come as a surprise to any of us since assessed value of property worth for tax collection purposes is often higher than the property owner can actually get for that property in the open market and whenever this happens property owners are paying property taxes on property they don’t own.  It is just one part of the sabotage levied against property owners.  No other taxation is based on an assumed worth of the property based on an assessor hired by government to make that determination.  Income tax is based on actual income earned during the preceding year….Sales tax paid by the consumer is based on the actual purchase price.  These are taxes levied once on new income or once new purchases and then it ends there.  Property Taxes are eternal and they are based on an assessors assumption not on the actual fair market value of the property which can only be determined by the price negotiated between a willing seller and a willing buyer.  Tax assessment has neither to make that determination.  Over a lifetime individuals can wind up paying more in property taxes than the actual worth of their property and its is the only type of taxation that allows for this sort of Sabotage of personal property.

Property Tax wasn’t always like this.  That began to change in 1949 and then in the 1960’s the state began to more aggressively use the local property tax to pass down state taxation through unfunded mandates at the local level.  The problem was only compounded by the expansion of of authority in the Administrative offices and when it comes to education spending that was the state Department of Education.  Through Title 22 of The Pennsylvania Code more regulations which serve as unfunded mandates began to be piled on top of us and then, with the pension perk granted to PSER’s things started going painfully bad for property owners.   In spite of the fact that very little, except how much they can increase our property taxes, is really controlled by the local school district.  Our General Assembly and Department of education controls those decisions and the cry of School Property Tax Elimination saboteurs of loss of local control is an absolute myth.   All you have to do is spend a little time exploring Title 22 of the Pennsylvania Code and the Public School Code of 1949 and you’ll see how little control we really have at the local level when it comes to education.

chart 1

In the above chart from the Independent Fiscal Office you can see the window during the housing crisis.  Personal income dropped dramatically and that is reflected in a drop in sales tax where people had less money to spend.  Property taxes just kept climbing and this was a contributing driver in keeping sales tax revenue down.  More property taxes to pay with less income translates into less purchasing power which slowed down any economic recovery since small business would have been impacted by a loss of revenue as people had less disposable income.  While opponents of property taxes talk about the stability of the property tax as seen in this graph, all that translates into is the lengths that home owners will go to in order to hold on to their homes.

The chart also demonstrates that since 2000 property taxes have outpaced personal income, sales and the CPI.  Much of that was connected to the pension costs.  Act 10 in 2010 only made things worse.  Act 10 mandates that PSERS recognizes its gains and losses over a 10-year period, instead of an already-ridiculous five years. Because this approach, called smoothing, allows for the pension to not immediately account for losses or gains, it gives the false impression that its financial condition is in better shape than it really is.

The pension gift to public sector unions in this state assumes a guaranteed investment rate of return of 7.5 percent, which is far higher than the 5.3 percent five-year return rate experienced on the market, according to Wilshire Associates, and much higher than the 2.5 percent five-year return rate PSERS has actually experienced.  That 5 percent disparity between what is promised and what they are actually getting has to come from someplace and if some of our state legislators have to sabotage the American Dream of home ownership to do so, so be it.  Its not really that the pensions are underfunded…the rate of return is so ridiculously high that the debt will just continue to grow and the interest to be paid on that debt is only going to compound the problem.  We aren’t to question why PSERS is only seeing a 2.5 percent return while the rest of the market is seeing 5.3;  We aren’t to question why they are promised 7.5 percent when the market is under-performing that return; We are just supposed to shut up and pay up. The legislators can call it what that want….I call it extortion and  sabotage!  It is little more that a protection racket to the private sector paid for by sabotaging the home owners of the state and it exists because there is a property tax that allows it to exist.  That has to be stopped.  If the legislators had to come up with this money out of the general fund resources the pension tsunami would would have been quelled a long time ago.  We often hear that the legislators are kicking this problem down the road….that’s not how I see it.  They are kicking the problem down to the local level, through the property tax while they high five one another claiming they haven’t raised our state taxes but their actions are a driving force behind the increases in our local property taxes.  Without the local property tax to hide these nefarious actions of sabotage against home owners many of our unfunded mandates as well as things like the flawed prevailing wage laws and paycheck protection would see the light of day because the revenue to provide for these gifts to specific factions would be accountable at the state level where the problem originates.

All of this is to clearly demonstrate that property owners in this state have continuously been sabotaged by our state legislators when it comes to finding a different means of funding education than our homes.   Every time that statistics increase every property owner impacted is but one more victim of economic sabotage being waged against home ownership in this state.

While we have seen more legislators than ever step up to defend property owners in the state, leadership and those who toe the leadership line, are still calling the shots. When they continue down this path and irate property owners express their outrage by calling their legislator’s offices those continuing these sabotage attempts become outraged. They refuse to look at how this is impacting this state.

The attempts of sabotaging the homeowner is not simply perpetuated by legislators but also by the campaign money machines that seek to protect their own interests at the expense of property owners in the state. It doesn’t take a lot of effort to do a follow the money search and see that the same legislators kicking back at Property Tax Elimination are being funded by major lobbying efforts that want to protect this Cadillac pension scheme and force homeowners to pay for it, even if that means some of those homeowners lose their own retirements or even to the point of losing their homes.

During one hearing on Property Tax Elimination, one opponent went so far as to state that the pain we feel in the state as property owners demonstrates that Property Taxes are working…..really, isn’t that simply paraphrasing Marie Antoinette’s sentiment towards the French people when she was told they could no longer afford bread?

The repeated attempts of sabotaging homeowners in this Commonwealth demonstrates no signs of slowing down. We’ve already seen two co-sponsorship memos for bills introduced in the House that would interfere with the reintroduction of HB 76.  Both bills use an expansion of the taxing authority of School Districts and leave the School Property Tax in place to continue climbing and to continue robbing others of their retirement and their homes. Having followed legislative saboteurs of Property Tax Independence in the past, I have no doubt that these two bills will not be the end and I have no doubt that some of these legislators will make every attempt to secure either 76 or 1776 as bill numbers in order to create confusion among the people regarding School Property Tax Elimination. To me, any attempt of that nature would be an ultimate attack against home owners in this state since every legislator in Harrisburg is well aware of HB and SB 76 and the work accomplished by grassroots organizations across the state to move School Property Tax Elimination. Any attempt to secure that bill number in the new legislative session I will view as one more attempt at sabotage.

For others, the American Dream of home ownership is being dashed to the rocks as they look into moving out of renting and into home ownership. Where they could afford the mortgage payments and such purchases would help to stimulate Pennsylvania’s economy, they are unable to complete the deal once the taxes are figured in to the total cost of the home. Strike yet one more victory for the legislative saboteurs and one more defeat of the people of this Commonwealth.

These acts of Sabotage often escape the media’s attention and few seem to be willing to accept the epidemic as a result of these actions against the property owners in the state. It has been an uphill battle exposing what is happening as those who would subvert what we are trying to do use ridiculous statements like the people who are losing their homes have lost them because they bought “too much house” completely rejecting the notion that they lost them because of “too much taxation!” as they seek to protect their campaign financiers who are accomplices to this plague. The evidence demonstrated that property tax has functioned like a wildfire across the state leaving people homeless or fleeing from the state for a safer tax environment. It is all there and it is all too obvious for anyone who is willing to look at what is happening. When we are told that 10,000 people a year losing their homes to runaway property taxes isn’t enough of a problem to do something about it, I can’t help but ask, how many people have to lose their homes to protect institutionalized theft of property before they will admit there is a problem.

The fact of the matter is that Property Ownership Saboteurs are in the minority…even in the House. That minority however is led by powerful people in the House who control committee assignments and determine which bills will move in to those committees for consideration. Bucking that leadership and the power they wield can come at great political expense in being removed from important committee positions or in seeing other legislation important to that legislator and the people of this state get crushed as an act of retribution.  It can also come at great financial expense with the pressure of well-funding political lobbying machines who can primary a candidate that bucks the entrenched system with a well-funded and well-greased political machine to attack them.

Even legislators not intentionally sabotaging the Property Tax Independence efforts are not immune from the onslaught of intentional deceptions promulgated by the saboteurs. They hear the deceptions and believe them to be true. They also face the same political pressure from those special interest lobbying machines and while the property tax issue may not be as important in their particular district as it is in the other areas of the state, like the 167 municipalities that are in pension liability debt or the 1/3 of the school districts who apply for Act 1 exemptions that are rubber stamped by the Department of Education to exceed limit increases on property tax, the economic impact in those areas hit hardest by the school property tax affects their districts whether they want to admit it or not. By ignoring this simple truth, while they may not personally be engaged in the sabotage conducted against property owners in the Commonwealth, they become an enabler of the saboteurs.

While it is true that the coming pension tsunami isn’t going to hit every part of the state as hard and it certainly isn’t going to have as great an impact in all economic groupings in the state, it will first swell to encompass those in the lower half of the median household income bracket which currently encompasses about 40% of home-ownership in the state (Census data).

The previous attempts of sabotaging school property tax elimination through the Exemption/Relief efforts have already demonstrated how these relief programs fail. We see an initial reduction that is almost immediately consumed by future increases in the school property tax driven by unfunded mandates passed down to the school districts and intended to be paid for through the local property taxes. The school districts must comply and should not be blamed for these expenses and that includes the pension tsunami. That wasn’t their fault. In other cases, however, school districts spend resources to provide for things like astro-turf on sport fields and other extravagances that come at the expense of property owners who already are struggling with their school property taxes. While many homeowners understand that budgeting means living within our means, that doesn’t seem to apply when it comes to education spending, certainly not at the state level.

Finding a replacement funding mechanism for education spending shouldn’t be left up to the legislators in Harrisburg…it should originate from the people the way HB/SB 76 has. It should cap future spending to the verifiable rates of inflation..It should never be about how much they WANT to spend, but about how much they HAVE to spend. Emergency or special funding needs that exceed normal growth should require no exemption funding referendums in each school district where the decision will be made by those paying for it.   Since the education of our children is the responsibility of everyone in the state the financial responsibility for that education should come from all of us through blended taxation: an equitable percentage of the Personal Income Tax and an equitable responsibility through the sales tax. It should not be funded through hidden taxation on the people of this state through corporate or business taxes that are simply passed on to the consumer through higher prices for goods and services. We need to see exactly what we are paying for and how that money is being spent. The replacement Revenue should have a built in mechanism that, if the collected revenue exceeds inflationary growth, a portion of that should be returned to the people by lowering either the PIT or the SUT tax, not allowing for it to be absconded by political saboteurs for their own purposes. It should fully restore the protection of the property of home-ownership to the property owner in constitutional compliance to our protected right to property.

Only one piece of legislation does this…HB/SB 76. There is more that needs to happen. The Public Sector Pension System needs to be repealed and replaced. Yes, we are accountable for what was promised to them while the law was in place but all future retirement investment, not just new hires, needs to be moved into a new system compatible to private sector retirement accounts. That includes our legislators as well. We also need to gut and replace the failed education funding formula from 1991.

It is, however, ridiculous to expect any single piece of legislation to tackle these other necessary education reforms. HB/SB 76 will cap future education spending and that’s a huge step. It will also make our state budget accountable for the unfunded mandates that will force necessary changes in that policy as well as force changes to the 1991 funding formula and Pensions, all through necessary and separate pieces of legislation that can deal with these issues the way they must be dealt with.

I continue to believe this is the most important piece of legislation in front of our General Assembly at this point in time and it will have my full support and dedication. I will not stand down nor will I settle for a compromise that only really promises to continue to compromise my rights to property and I will continue to expose the attempts to sabotage this legislation and the saboteurs whenever possible.

I am certain that legislators who are trying to subvert School Property Tax Elimination will object to be calling saboteurs. As a property owner in this Commonwealth I can no longer see these actions against anything else. The intent is to use legislative means to subvert my rights to property or, in the worst case, to take that property from me is an affront to very nature of Liberty. I am not calling for any action of violence against those who would stand in the way of Property Tax Independence. I am, however, not willing to have my property taken from me nor am I willing to stand by while I see this happening to friends, family or neighbors. As an elected representative of the people of this Commonwealth you have a responsibility to represent the people of this Commonwealth, ALL OF US. As part of that obligation you have a responsibility to abide by and respect the entire Constitution of this Commonwealth.   The foundational Principle of the protection of our rights to property as the reason we enter into governed society in the first place remains as true today as it did when those sentiments were first uttered and that sentiment has been betrayed and continues to be betrayed in growing numbers. When any form of taxation is applied to any form of property that has the ability to actually exceed the worth of the property being taxed, then that taxation is an oppressive tax and it becomes an act of tyranny. That is exactly what has happened with the school property tax. It needs to be eliminated and it needs to be eliminated in a way that kills the beast and then replaced with a form of taxation that can no longer be abused the way the school property tax has been.

It is time to do the right thing because it’s the right thing to do. Eliminate the School Property Tax and enact HB/SB 76.

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One thought on “Saboteurs of Property Tax Independence!

  1. This article is just outstanding. It clearly and as concisely as possible lays out the facts in an irrefutable manner. The economy of the entire state is literally at stake. HB/SB 76 is the path to economic prosperity.

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