The Vicious Cycle of Growing Government Through the Property Tax

So let me get this straight: The government has recognized that rising rent is a problem. One of the reasons for the creation of this rising rent problem is the rising property tax. So the Government implements a program to subsidize rent. As property taxes increase on a rental property the landlord must raise the rent on the people the government is claiming to be helping because their rent is too high.

The revenue for subsidizing the rent is coming from raising taxation in other areas.  For the property owner, this means that they are paying for their own property taxes while helping, through other taxes and sometimes through the property tax itself, to subsidize the cost of the rent increase for lower income families that came as a result of raising the property tax.

As rent has increased, we also see the desire from government to subsidize the cost of home utilities (heating, electric, etc.) as well as subsidizing phone and internet service for low income families resulting in higher prices for everyone else.  This creates more people who fall through the cracks and grows the number of people who must turn to the government for help to make ends meet.

As property taxes increase the job market isn’t growing fast enough to meet the needs of the growing population so many have chosen to leave the state.  As property taxes increase, more smaller business can not provide wage increases for their employees resulting in stagnate wage growth for many in the private sector.  Many of these small businesses can also not afford to provide for healthcare for their employees.  Enter the government once again to provide costly programs to supposedly ease the pain that the property taxes are creating.

As property taxes increase more farmers struggle to meet the tax obligation.  No problem, the government steps in to create a new program to ease the property tax burden for the farmer.  As a result, the property taxes increase again.  As more farmland is sold off to pay for the taxes, less food is actually being produced in Pennsylvania forcing us to go elsewhere, out of the state, for that food making the food more expensive for the Pennsylvania consumer.  That’s okay though because the government has program to help you ease the burden of higher food costs…to pay for it they just need more revenue from you from other taxes.

Every evidence demonstrates that the property tax is creating more problems and making government more expensive to maintain while contributing to the growing problems of blighted properties.  After all, if you can barely afford to pay your taxes, you can’t afford to keep up with the necessary maintenance of your property.  That’s okay though because the government is there with more programs to help with blighted properties, all they need is more of your income through taxation.

When I hear that the property tax isn’t the problem; that the real problem is government spending, I can’t help but wonder why these people can’t see that the property tax is actually creating the need for so much of this government spending.  The property tax becomes the enabler.

The property tax results in less disposable income for families while making it harder for them to provide for their own families needs.  It doesn’t matter if you are a home owner or you rent the property tax makes EVERYTHING more expensive.  Every business must shift their tax burdens on to the consumer if they want to stay in business.  That means that every property tax increase makes everything we do, everything we purchase more costly, from the loaf of bread we buy to the legals services we use.

Rather than solving the problem that creates these greater expenses for the consumer the government attempts to fix the problem by creating more spending programs which inflates our taxes  all the more.  In doing so they aren’t actually helping the people who need the help the most.  The government is artificially making everything more expensive through increased taxation rather than eliminate the property tax and removing the very thing that is artificially driving up inflation.

It is one thing when the government steps up to provide relief because of a recognized need, it’s another thing when government is actually creating that need and solves the problem by making that need all the greater.  The old expression of the cure being worse than the disease applies except that these cures never actually cure.  If anything they just temporarily ease the pain for some while spreading the disease to others.

It seems to me that the only real winner here is the government!  They raise our property taxes creating a need for government programs that appear, on the surface, to be helping but are actually hurting Pennsylvanians and the economy.

It’s all in creating more revenue wants from the government by taking that revenue from us resulting in less disposable income for us to support our communities through local business which then translates into government grants and subsidies to help local business establish by giving them tax incentives through KOZs, LERTAs and other government programs that have all become necessary because we have a property tax.

No matter how well intended, these programs exist because we have a property tax and as long as we still have a property tax, the need for these programs will continue to grow.

Many of these programs are paid for by increasing the property tax on property owners, which drives up the cost of rent and creates more need for more government programs while forcing more people to become more reliant on government subsidies.

To maintain this property tax we are told we need the implementation of more frequent expensive reassessments that only really result in higher property taxes creating more need for more government programs (more taxes) to supposedly ease the unilateral inequality and cost of the increasing property tax.

While PIT and SUT taxes grow naturally without the need for constant tax increase, the only way to generate more money from the property tax is to increase the property tax.  Every assessment appeal, every abatement, every property tax relief program has the same impact, an overall need to increase the property tax to maintain the revenue turning the majority into losers in these tax relief schemes.

The end result is a creation of a tax system that is rapidly becoming more and more unsustainable for more and more people.  You don’t have to be an economic genius to see that.  You just have to open your eyes and look around you.

It’s a vicious cycle so please tell me again how the property tax is stable revenue from taxpayers to fund public education!

A rebuttal of a letter to school district residents.

Another letter has come out from a school district administrator that is filed with misinformation.  I have serious concerns about a school administrator who sends out a mailing like this to parents in a school district that contains this much misinformation

I’m going to use this post to refute what is in the actual letter.  My Responses will be in red:

Dear Parents and Community Members,
As a supporter of our public schools and the belief that every American child deserves the right to a quality public education, I’m writing to ask for your action at the polls regarding a legislative proposal that could seriously impact the quality of our schools.
Many educators are very concerned about a November 7 ballot question that asks whether the Pennsylvania Constitution should be amended to allow local taxing authorities to exempt homeowners from paying property taxes. We strongly feel the answer to this question should be “NO.”

This ballot question doesn’t include the critical piece of information that according to state law, another source of revenue must be created to replace local property taxes. Legislators are considering that the new revenue source could come from increases in other taxes, in the form of Senate Bill 76. Under SB 76, Income Tax will go up from 3.07% currently to 4.95%, sales tax will go from 6% to 7% and the list of items to be taxed would increase. Those new revenue sources would go directly to the state, and it would be up to the state to determine how much each school district would receive.

Senate Bill 76 and the figures being used here are for complete elimination of the school property tax for all property, not just for homestead property.  The ballot referendum is HB 1285 and is not connected to HB or SB 76.  Here we have an attempt, once again, to deliberately confuse the issue by connecting the referendum to school property tax elimination through SB 76. 

School districts already have the option of reducing their property taxes by 50% through a variety of approved alternate means at the local level.  The referendum simply expands that from 50% to 100%.  Rather than explore other options of school education funding, school districts have chosen to continue to place the lion’s share of this burden on property owners even though the property tax is, in no way, based on ability to pay.  As a result 10,000 people face losing their homes each year….that this doesn’t alarm our school districts is equally alarming to me.

The last sentence is a gross misrepresentation of the legislation which is explained in greater detail following the next paragraph.

This means that under this new funding formula, the state could decide to give more money to urban districts and less to suburban ones, like West Chester. Or, they could determine another complicated funding formula that would once again leave funding up to the state and take away our local control.

The connection to 76 is made and then it leaps to this gross misrepresentation of the legislation.  Under SB76 all money collected through the increase/expansion of the sales tax and increase in the PIT goes into a separate account that is not part of the budget process.  From the revenue collected each school districts get 100% of the revenue they are currently receiving adjusted annually tied to rates of inflation.  The Independent Fiscal Office estimates the annual increase will exceed 3% based on natural revenue growth of the PIT and SUT tax.  This annual increase will not require additional increases in taxation.

In order for education revenue to increase through the property tax it requires increasing the tax burdens on property owners.  The revenue from property taxes doesn’t increase without a tax increase, unlike the PIT and SUT tax.

The superintendent seem to be deliberately trying to confuse the parents who received this letter by tying the Basic Education Funding Formula to SB 76.  They are two separate issues and two separate funding mechanism. 

This paragraph is a contradiction of the the first sentence of his letter to the parents.  To me, the superintendent is making it perfectly clear that he appreciates the inequities of funding and the power of the local school district to create those inequities.

I’ve repeatedly address the myth of local control at this blog and won’t do so here.

Harrisburg struggles to balance its own budget. The General Assembly currently doesn’t have a revenue budget for the current year. How can we leave our own school funding up to them?

Again, the Harrisburg annual budget has nothing to do with the funding through SB 76.  Once passed the General Assembly doesn’t have access to these funds to do with as they please.    It is already appropriated to go to the school districts as the replacement revenue for the property tax

School districts are currently facing so many unfunded mandates. Special education costs are skyrocketing due to no fault of public schools. Pension costs are increasing dramatically, again, because of a state mandate. Many districts are also facing aging buildings and population growth. Without the ability to collect local property taxes, who’s to say that adequate funding will come from Harrisburg to support these essential needs? Legislators have already placed a three year moratorium on construction reimbursement for public schools, because the state is essentially broke. What is next?

School districts have done nothing to stop the unfunded mandates of prevailing wage costs that drive up the cost of school construction and renovations by as much as 30%.  Many of the mandates actually don’t originate in the general assembly so placing all the burden of unfunded mandates on the legislators is misdirection.    Why?

Because the educational complex doesn’t want you to realize that many of these unfunded mandates are coming out of the Department of Education whose board is made up largely of PSEA, PASBO and other school administrators.   Their problem isn’t so much that the mandates are unfunded, they simply seem to want the state to pay for it all.   But since the state actually doesn’t pay for anything, that means they want you, through your taxes, to pay for what they want.

Recently the Secretary of the Department of Education filed an educational plan for Pennsylvania with the Federal Government without submitting the plan for approval to the General Assembly.  This is exactly what they did to push Common Core on our schools.  Even though of Commonwealth Constitution says that it is the General Assembly who is to supply for a thorough and efficient system of education, The Department of Education continually works around the general assembly.

Even though all lawmaking authority is supposed to reside in the legislation branch, the Department of Education, like all of the executive bureaucracies, resides in the executive branch.  Yet these created bodies of government pass regulations and mandates that are paramount to laws which much be followed.  This school administrator doesn’t seem to want to see this change and to restore the Constitutional Rule of law which is supposed to preside over the Commonwealth….Why?

This ballot question does not apply to businesses, which means they will still pay property taxes. Surely, businesses will not be pleased with this inequity, and will want some relief also. They may fight legislators to limit property tax appeals by school districts, as previously proposed. Under this previous proposal, school districts would not be allowed to reassess businesses. This means a business built or purchased for $1 million, and sold for $10 million would only be assessed at the $1 million rate.
While I firmly believe that our school funding formula and system of taxation needs significant reform, I am strongly convinced this kind of back door legislative change is not the kind of positive, sustainable solution that we need. It deserves a much longer, more thorough review, with more equitable and sustainable solutions.

SB76 is the equitable solution but the school districts are fighting us.  So are the lobbyists of the business community.  Neither seems to care what is happening to thousands of families…children, parents and seniors…as they struggle to keep up with the demands of the educational complex in Pennsylvania. 

How many more people have to lose their homes to pay for pensions and benefits given to the public sector that these families in the private sector can’t provide for themselves or for their families?

How much more farmland must we lose in this Commonwealth to the egregious property tax before they admit to the seriously flawed system in place for education funding?

How much more rent subsidy must the government provide because the property tax keeps driving up the cost of rent forcing many families to double and triple up leading to overcrowded housing which is NOT conducive to quality education?

Pennsylvania already ranks 45th in the nation in percentage of state funding for public education. We are already nearly last in the nation for funding! This will only make it worse.

If Pennsylvania increased their funding to school district to meet their constant demand for 50% funding do we honestly think that our school district property taxes would decrease?  No, the next year school property taxes would again increase and then the school districts would be complaining because the state isn’t meeting the 50% mark again.   Besides, SB 76 would mean that 100% of the funding is coming from the state so what’s their real complaint?

Pennsylvania is among the top in education funding per populace.  Thats’s a contributing factor in why we rank 45th in the nation in percentage….The percentage however does not reflect actual dollars being spent.  We give more to education at the state level than most states but it’s never enough for public education in Pennsylvania.  That hasn’t stopped them from continually increasing our property taxes.  In the past 20 years we’ve seen a 140% increase in property taxes.  No amount of money from the state will stop this as long as the property tax exists.

Pennsylvania is also at the bottom of the index for keeping existing business in the state.  We are at the bottom of the index for attracting new business to the state.  Between 2015 and 2016, 45,000 people, one every 11.5 minutes, left the state to live in more tax friendly climates. 

The West Chester Area School District School Board is planning to pass a resolution on October 23 asking residents to vote NO on this ballot proposal.

First of all, how does this superintendent already know this resolution will pass?  Shouldn’t the passage of the resolution require an open vote with public input rather than coming to a school board meeting with a predetermined plan to do as they please?

Since the board has not yet met, nor have they voted on this amendment, the superintendent’s letter is premature demonstrating a lack of priority.  The superintendent’s letter should have waited for the approval and consent of the elected school board which is supposed to be the governing body of the school.   Instead we get a letter that is a gross misrepresentation of a piece of legislation carrying official weight in an attempt to sway public opinion before an important vote on the issue from a paid employee of the school district.

Over the last several months other school districts have carried the rhetoric of the school associations and organizations (PSEA, PSBA, PASBO, etc), none of who are elected by the public, demonstrating a total lack of credibility to me in their continual attempts to misrepresent the legislation. The administrators, business officials, superintendents and school board members who just blindly accept the talking points from these agencies and then repeat them are not without blame. Real Education involves a willingness to check the claims to ascertain that the statements are, in fact, true. That is obviously not happening. So they either repeat this information out of blind allegiance or they do so deliberately. Either way, it’s a sad statement to me about the condition of education in our public schools. After all, these are the same people who are entrusted with overseeing the education of our children.

This problem is then compounded by the opposing legislators who have refused to meet with the public to hear their concerns about the property tax issue; who will not come out to the town halls to learn the facts and then repeat the mantra of the school association lobbyists. The disconnect with the people in favor of the campaign funding school lobbyists is also a betrayal of the trust of the people who elect them.

It’s not all of them (Legislators and school associations alike) but it certainly does appear to be a large percentage of them.

I am angry but, perhaps even more so, disappointed that so many people entrusted with the education of the children of this Commonwealth are so unwilling to check the actual facts and will then stoop to such gross misrepresentation.

Those of us out their fighting for real and necessary tax reform for education funding do so without getting paid to do so and without resorting to misinformation and misdirection to make our points.  Unfortunately we do not have the financial resources nor can we use tax payer collected money to pay union dues or to pay for the promotion of the misdirection we’ve seen come out of the school districts with regards to HB/SB 76. 

If we can’t trust the governing bodies of our school districts to report the facts about a critical piece of legislation, maybe we need to start questioning our trust of their ability to educate our children.  The Auditor General has conducted several audits of school districts and the accountability of those school districts to the tax payers doesn’t paint a pretty picture.  One school district found itself in the courts because of grossly misrepresenting their budget to the public.  The school district lost that case.  This is more commonplace than most taxpayers realize.

Here’s another ranking.  In 2015, Pennsylvania was given an F rating from the center for Public Integrity placing it tied for 45th of the 50 states.  It took a legislative process to make our school districts more accountable to the public in terms of transparency because they didn’t do so on their own.  Even after this, we still have school districts misrepresenting budgets and creating confusion about debt service.  At a recent town hall two different parents in the same school district were given conflicting information about budgets and the retained debt service.

How can the public make informed decisions if they are provided with conflicting information?

Public schools deserve adequate funding. Without it, the quality of our schools will rapidly decline. There is a direct correlation between property values and the quality of our public schools. As the quality of our schools fall, property owners will see their own homes drop in value. This is simply not good for the residents of Pennsylvania.
If you care about the quality of our schools, please vote NO on the Nov. 7 ballot question. The future of our children literally depends upon it.

The Independent Fiscal Office says that the elimination of the school property tax would actually increase property values by 10%. Why doesn’t this superintendent tell the whole truth.  Property taxes do drive down property values.

The current system of education funding is unsustainable.  The growing pension debt is going to increase the cost of property taxation.  The 140% increase we’ve seen over the last 20 years will continue to grow while wages for many in the private sector have stagnated. 

  • We struggle to attract new business
  • We struggle to keep our working families in the state
  • Many struggle just to stay in their homes. 
  • The Property taxes are forcing many to choose between staying in their homes or providing necessary food, meds and clothing for themselves and their family. 
  • The Property taxes are leading to overcrowding in homes as families combine to meet the demands of the tax. 
  • Because of the cascade effect of property taxes, we pay more for the goods and services we use in Pennsylvania.
  • The Property tax is a prime contributor to blight in our neighborhoods.  If you can barely afford to keep up with the taxes, you can’t afford to do the necessary maintenance on those properties.

The property tax has created gross inequities in education funding and as the battle between wealthy school district and poorer school districts grow, those inequities will only become worse.  Many 3rd class cities are landlocked with populations that are far below the state average median income.  Many of those residents can’t afford to move or to live in the higher income communities.  Should those children in those schools be punished because the property tax can’t provide for the same quality of education as their neighboring districts?

If it’s all about the children, shouldn’t it be about the education of all the children, not just the children whose parents can afford to pay more.  As I read it, that is exacty what this superintendent is implying!

The solution to that is not to continue to rely on a funding system for education that requires constant tax increase but to shift to a system of taxation that grows naturally without the need for increases.

One final word on local control.  It’s supposed to mean our control over our school boards which is virtually non-existent.  It’s not supposed to mean their ability to tax us as much as they want, when they want.  SB 76 restores local control to the citizens where all future tax increase at the local level through a local income tax would require the consent of the governed.  Maybe, that’s what they fear the most!