This is written in response to Senator John Gordner’s comments about school property tax elimination through SB 76. The original article can be found here:
Senator Gordner says “the plan forces the state to lean too heavily on revenue that fluctuates with the economy. Should the economy tank, and sales and income tax revenue fall through the floor, the result would be catastrophic”
The 2013 IFO report shows that both the Sales/Use Tax and the PIT taxes stayed well above the the Consumer Price Index even during the hardest hit part of the recession. The Consumer Price Index is a way of measuring inflation and is factored into future funding increases in HB/SB-76.
Gordner’s statement is fear-mongering and unsubstantiated by the historical record.
Since 1993 the Sales/Use Tax and Personal Income Tax have stayed above the Consumer Price Index. The real catastrophe is that the school property tax increases during this time, far outpacing the CPI, SUT and PIT taxes, and average weekly wage. slowed the recovery. Take note that the Property Tax continued to rise while all other economic indicators dipped.
It could, in fact, be argued that, in that slower recovery, the sales tax took a harder hit because there is a school property tax that continued to increase during that difficult economic turn from 2008 through 2010. People had less money to spend but their school property taxes continued increasing making it more difficult to recover. People saw wages stagnate or faced losing their jobs during the recession. Their school property taxes, however, continued to increase. That gave them even less purchasing power. Eliminate the school property tax and the sales tax will not take as big a hit in future down economic times. That’s good for business, good for home owners, and good for the state.
How many jobs in the small businesses community could be saved in down economic times if there wasn’t a school property tax on the small business? That would help stabilize the PIT as well.
The rising school property taxes made the recession more difficult to handle for many working families and the graph certainly reflects that. Those taxes made the recovery time last longer and some would argue that for many working families they still haven’t seen the recovery. Statistics show that wages have not recovered for working families below the median household income levels of per-recession time.
The fact of the matter is that taxes income should fluctuate in down economies but this will never happen with your home. Your assessed value will be your assessed value adjusted by a Common Level Ratio that works on county-wide averages that may or may not reflect in the area of the county where you live. If home values drop, your assessment will stay the same unless a county-wide assessment takes place or you pay the price for a reassessment of your property. If you assessed value is higher than you can sell that home than your assessed value reflects property you do not own. In those cases you are paying a tax on the property you do not own. The Property Tax is the only tax that works like this.
Gordner has chosen to ignore this data in making his statement.
Gordner also makes the claim “The legislation gets rid of property taxes for businesses, along with homeowners. Wal-Mart won’t pay property taxes, for example, but its customers will pay more in sales taxes. It’s a $3 billion to $4 billion tax shift”
Gordner is advancing class warfare rhetoric that smells of being anti-business. Since the replacement revenue for the school property tax is more than $12 billion dollars the lions share of those taxes aren’t coming from businesses. Even at $4 billion that leaves working families in the Commonwealth paying the other $8 billion.
There’s that whole cascade effect of of property taxes that forces us to pay higher prices for the goods and services we use. (see: The Cascade Effect Of Property Taxes). As the property taxes result in higher prices for the goods and services we already see that $3 to $4 billion dollars being tax shifted through higher prices.
The business property taxes are not applied Wal-Marts alone. Why isolate and name them?
The school property tax impacts small businesses. Those property taxes are passed on to consumers through higher prices for goods and services.
As we saw recently in North Cornwall an appeal by the local Lowe’s regarding their property taxes will cost the taxpayers an additional $22,000 in retroactive repayment for an incorrect and over-assessed property. That will reflect a tax shift that will be directed to the rest of the population. It was estimated that this retroactive action would cost the school district an additional $500,000.
Because of an assessment error, the loss of that revenue will have to come from everyone else. That’s not Lowe’s fault, it’s the fault of a bad assessment.
Lowe’s isn’t alone. We are seeing these types of appeals coming from many major large corporations across the Commonwealth. In many cases they win those appeals because of the inherent problems of assumed property worth that exists in the assessment process. Those appeals cam mean millions of dollars in revenue that has to be shifted on to the rest of the community.
Gordner also chooses to ignore the fact that owners and CEO’s of business would also see an increase in their PIT. So would the Store Managers. Instead of taxing an assumed and often incorrect property worth, we tax actual income. Instead of assuming worth the tax is based on ability to pay.
Those same people will also pay the higher sales and use tax on the personal purchases. It isn’t like they aren’t treated the same way as everyone else and become entirely exempt from paying any taxes to fund education.
Wal-Mart is not just a thing to be rolled out and attacked for convenience sake. It’s a business model that requires people to make it the success it is. That includes those who work there and those who shop there. These business create jobs. The employees and the owners are paying a PIT tax that goes to the state. The consumers are paying a slaes tax that goes to the state.
What Senator Gorden just admitted is that because of the Property Taxes on businesses, consumere in the Commonwealth are paying $3 to $4 billion more in increased costs to good and services because of the property tax and he seems to be okay with that!
Let’s look at this from a different perspective. A business with a bad business model in the same location would not generate the same revenue. That revenue will be reflected in the wages of everyone involved.
Two things will kill a business any business model. 1) A bad model that is reflected in providing services the consumer does not want or with over-inflated pricing coupled with lousy customer service. 2) Government interference through bad tax policies or over-regulatory means.
How many small businesses did our General Assembly kill last year with their retroactive vaping tax? How many more businesses have closed their doors or relocated because of the over-inflated property taxes?
A good business model will see higher wages that wouldn’t be hindered by the burden of a school property tax. Instead of artificially increasing wages through government mandates we begin to let the economy do what it should do in a free-market society.
Gordner points to Wal-Mart but ignores that the property tax will also be eliminated for the many small businesses in the Commonwealth.
For every Wal-Mart there are hundreds of small family owned businesses in our communities. In the grand scheme of things, far more employees work in these small businesses and those workers also contribute to our economy through the PIT and Sales/Use Tax.
That money goes to support other local businesses. The more disposable money you put in their hands, which school property tax elimination would do, the better it is for everyone.
Those small business include the smaller family farms who are being crushed by the property tax and forced into government controlled programs like Clean and Green.
Those small business may not be able to afford to hire the team of lawyers that their corporate counterparts have on their payroll to fight for these assessment appeals. Of course if your goal is to keep crushing the small business to the benefit of their corporate counterparts then you would want to maintain the status quo.
That is the status quo that Gordner seeks to protect to the detriment of the working families in this Commonwealth.
School Property Tax Elimination will attract more business to the state without the need for corporate welfare programs like KOZ’s and LERTA’s because of the property tax. Those KOZs and LERTA’s punish existing businesses who have been there supporting their community by not giving them the same exemptions. It’s also true that in many cases once a KOZ expires the business will relocate. The promises of higher taxes to invest in our communities future is shattered. We paid higher taxes for nothing.
Exempting all business properties from the school property tax will attract more business to the state. That means more jobs creating more disposable income. It also means more money generated through the PIT and Sales/Use Tax resulting in less need for the government to increase our taxes. It will go a long way towards helping to end this growing problem of out-migration of working families who can no longer afford the excesses of the school property taxes in this state and leave that state for lower property taxes..
The majority of our state ranks in the highest 15% for property taxes in the entire Nation. That’s just one more fact that Gordner chooses to ignore. (See: A County by County Analysis of Property Taxes in Pennsylvania.)
Senator Gordener complains about the $3 to $4 billion tax shift while ignoring that, because the property tax we’ve seen decades of tax shifting policies all of which is hurting the working families in this Commonwealth! (See: HB/SB 76: Helping Undo Decades of Tax Shifting Policy!)
As a final point, Gordner ignores that more jobs in our local communities means more local EIT without increasing the local EIT rate in our communities. This would make them making them more solvent.
These EIT Taxes are based on ability to pay not on some assumed and fictional worth of property determined by an assessment company hired by the government that never fluctuates to reflect the actual fair-market value of a home or business.
Wouldn’t it be nicer to see more solvent local communities who aren’t cutting local police protections to rely on the State Police?
Wouldn’t it be nice to stop seeing cuts in important health and human services departments because of shifting to a tax funding mechanism that creates jobs instead of protecting the status quo the ends up sending those jobs packing?
Wouldn’t it be better to keep our seniors who are physically able in their homes rather than force them into state subsidized assisted-care facilities?
Wouldn’t it be better to make it easier for first-time homeowners trying to escape rental servitude? Would it be better to allow them to establish roots in our communities rather than driving them from rental property to rental property as the increase in property taxes drives them out of their rented home?
Studies show that the increase in rent correlates to the increases in property taxes. This had led to more need for government subsidized rent. In other words as we pay higher property taxes, rent increases creating more need for government subsidies which impacts the state budget needs every year. That’s the impact of property taxes on those who rent.
The Independent Fiscal Office report from 2013 had this to say about SB 76:
• The elimination of school property taxes increases the disposable income of property taxpayers. The analysis assumes that 70% of the property tax cut goes to individuals. It further assumes that homeowners spend 80% of the increase in disposable income. (Pages 17-18) (This would be a huge stimulus for Pennsylvania’s economy.)
• The analysis indicates that HB 1776 will cause home values to increase, on average, by more than 10% statewide. (Page 23) (This will restore a large amount of the equity that was lost to homeowners during the 2008 housing downturn.)
• (Regarding business entities) … the income flows through to individuals as higher disposable income. For pass through entities, the analysis assumes that owners and shareholders spend 80 percent of the increase and 70 percent is spent on taxable goods and services, yielding another secondary effect of $34 million in increased sales taxes for FY 2013-14. (Page 18)
• Working age homeowners realize a tax cut. The analysis finds that the increase in federal income tax (through lower itemized deductions), state income tax, and sales tax is more than offset by the reduction in property taxes. (Page 21)
• Retired homeowners realize a significant reduction in taxes. The analysis finds that the property tax reduction easily offsets any increase from the higher sales tax. (Page 21)
• Benefits would also accrue to home builders, home developers, and other land owners who convert current land holdings into new housing plots. Employment would increase in the construction sector as well. (Page 23)
• The elimination of property taxes would significantly reduce the property tax share and would clearly increase the attractiveness of the Commonwealth for business location and expansion. (Page 25) (Expansion of existing businesses and attracting new businesses to the Commonwealth will generate jobs for Pennsylvanians.)
I am really sick and tired of the mouth-pieces for campaign-funding special interests who are working against the best interest of the working families of this Commonwealth. The re-spouting of these misleading and often actual downright misrepresentations of the facts is becoming a growing concern among citizen advocates who have taken the time to research and review these issues that are so important to us.
We have listened to them for 6 years now using the same tired talking points that have been refuted time and time again. More than 90% of this blog has been to inform us all when the misleading and misdirection comes.
Until they start offering real solutions to a very real problem in this Commonwealth; until they come up with something better all they offer us are excuses. We deserve better! (See: Excuses Without Solutions)
For more on the plan to eliminate the School Property Tax in Pennsylvania visit www.ptcc.us