nor shall private property be taken or applied to public use, without authority of law and without just compensation being first made or secured.
Article 1, Section 10 of the PA Constitution
The Pennsylvania Constitution is supposed to be the law of the land. When a law is passed that violates the Constitution, those who passed that law are guilty of violating the Constitution…guilty of violating the law and their oath of office.
Throughout the history of the fight for property tax elimination we have pointed out egregious violations of our rights to property that exist because of the Property tax. We have pointed out that 10,000 people lose their homes to the property tax each year. It’s time to consider what happens during this property seizures and eventual sale on the tax auction block
A recent article in the Times Leader (https://www.timesleader.com/news/715302/luzerne-countys-september-back-tax-sale-roster-at-2545-properties) reported on an recent tax auction that took place in Luzerne County on August 8 of this year. It demonstrates clearly what takes place. It listed seven of 81 properties that were sold on the suction giving some details of the sales. As you read this please note the actual sale price contrasted to the actual assessed value of the property and remember what Article 1, Section 10 says.
- Wan C. Ho, of Queens, New York, representing Wilkeshire RE LLC —$20,000 for a 3,000-square-foot, double-block assessed at $80,300 on Hillside Avenue in Edwardsville.
- Daniel Cruz, of Wilkes-Barre — $22,000 for a 2,300-square-foot house in the 200 block of Academy Street in Wilkes-Barre assessed at $100,900.
- Michelle Hernandez, of Queens, New York — $26,000 for a 1,350-square-foot house on Spruce Street in Wilkes-Barre assessed at $60,900.
- Karina Broes, of Randolph, New Jersey — $30,000 for a 1,500-square-foot house assessed at $117,600 on Pond Hill Mountain Road in Conyngham Township.
- Antonio Mannino, of Hanover Township, representing Puma Motors Inc. — $39,000 each for a vacant 0.23-acre lot assessed at $10,000 on Buck Birch Lane in Buck Township and a 2,170-square-foot house assessed at $174,500 on Foothills Drive in Butler Township.
- George Karosa, Wyoming — $42,000 for a 1,544-square-foot house in the 100 block of Slocum Street in Forty Fort assessed at $104,000.
Not a single one of these properties reached the actual assessed value of the property.
The article states that the total price generated from the auction of 81 properties came to $642,781. The total revenue from the seven listed properties comes to $179,000 of the $642,781 leaving $463,781 for the remaining 74 properties. Simple math tells us that the average revenue generated from the remaining properties comes to less than $6,300 per property.
What happened in Luzerne County is not an exception to the rule. It is commonplace when homes are seized and sold at public auction for tax delinquency.
The property owners faces the distinct potential of loosing everything. The only real concern at these tax auctions is to meet the delinquent property taxes due on the property with no regard of just compensation to the actual owner of that property being first made or secured.
The property owner is treated as a criminal simply because the they couldn’t keep up with the tax demands against their property even though those tax increases often exceed inflationary growth of wages. A serious illness, the death of a spouse, a downturn in the economy that results in a temporary job loss can all lead people to find themselves unable to meet the demands of property taxation. There are many reasons that people can fall behind on their property taxes because the property tax is not based on ability to pay. It is based on an arbitrary value placed on a property where the homeowner really has little, if any, say. While the assessed value is often sold to us being the fair market value of a property, that is simply not the case. Fair market pricing should be determined on a price agreed upon by a willing seller and a willing buyer.
In the case of a tax auction, the actual property owner has no say. The property is sold based on a price agreed upon by a buyer and the government, not the homeowner. Their voice is removed from that process. There is no consideration of the property owners investment in that property or in the equity acquired in that home.
I said that the home-owner is treated like a criminal but that’s not really true. In other criminal proceedings, the accused has protected rights not afforded to the property owner. In other criminal proceedings just penalty for a crime is not to be excessive. The penalty is to be equated to the crime.
That is hardly what happens in the tax seizure and sale of property. The penalty goes far beyond the crime by taking something completely from the property owner without any real consideration of just compensation.
Adding insult to injury, the property tax impacts everything we do. That includes the goods we purchase, services we need and even the entertainment we pursue. Property taxes levied on businesses are passed on to the consumer resulting in higher prices. As our property tax continues to increase above the rates of inflation, it impacts the prices of everything because all of those businesses are paying the property tax as well.
We often here that eliminating the property tax for business is a huge tax savings for them but we rarely consider how the property tax on those businesses impacts the cost of the things we use.
Looking at a local business in the county where I live that sells something as simple as Ice Cream, I found that their total property tax is $21,624. Now remember that the average property tax where I live is about $2,400.
A large Ice Cream Cone sells for $2.49. In order to sell enough large Ice Cream Cones to meet the tax obligation they would have to sell 8,684 cones and that’s not factoring in the cost of materials, employees and other operating expenses. If $2.00 of that cone covers all other expenses they would have to sell 41,131 ice cream cones to pay the property tax without accumulating a single penny in business profit. That’s also being generous. I would assume that it costs more than $2.00 in other operating expenses but I’m just trying to generate an example of how this impacts the cost of the things we use.
Adding insult to injury, if this property was located just 1/2 mile to the east it would be in a different school district where it’s property taxes would be $8,500 more which is roughly about 30% more in taxes. They would have to sell an additional 3,414 ice cream cones again with not factoring in materials, employees and other operating expenses. Allowing for the $2.00 in other operating expenses per cone, they would have to sell 61,478 ice cream cones to meet the tax obligation without earning any profit. The differing property taxes creates an unequal business opportunity which might help to explain why it’s so difficult to attract businesses to the higher taxed school district.
The local Walmart, the business that so many love to hate, pays about $250,000 in property taxes. If they were just a few blocks away in a different school district, those property taxes would total $353,919, an increase of more than $100,000.
To refuse to accept the notion that property taxes make everything we do cost more is simply ridiculous.
So, while the property tax makes everything more expensive, our property tax continue to increase continues to exceed above the rate of inflation making it harder for people support local business because they have less revenue to spend and the things they purchase will cost more because of the property tax.
You see, when people make the claim that business can afford to pay more, they are foolish enough not to understand that they really don’t pay more because that cost will be passed on to us and therefore, we pay more, not just more in property taxes but more for everything.
The clothing you wear, the food you eat, the medications you need, the legal services you seek, and yes, even that ice cream cone with which you treat yourself…it all costs more because of the property tax.
Then, if you find yourself in a position where you can no longer afford the property tax, they’ll take your home away from you and sell it in an auction where you will most likely lose your investment in that home all the while with supporter of property tax applauding the stability of the income tax as a revenue source for government. That government tax collection stability is always predicated on the instability it causes for people who have to pay it.
It stifles job creation and job growth because it stifles business relocation to the state and because the property tax varies so much from school district to school district we find that establishing business in higher taxed but lower economic third class cities are actually driving business to locate out of those districts making them more reliant on homes rather than business to meet the tax wants.
In the latest report from the Independent Fiscal Office on Property taxation we find that $7.048 billion of the property tax comes from owner occupied homes. More than 40% of that, or $3.087 billion, comes from seniors over the age of 60 even though seniors over the age of 60 make up only 20% of the total state population.
For the seniors living on fixed income with limited resources, the increase in property taxation can be overwhelming. While watching the cost of everything continue to go up, including essential medical costs.
These seniors are more apt to have actually paid off their homes and then to face losing that home that is paid for in full, having it seized and sold for pennies on the dollar all in the name of tax fairness and tax stability should be reprehensible to all of us.
We started this by looking at a news article from Luzerne County. I quoted the price of homes sold in auction in August. The article also states that just one month later a new property tax auction is set to go forward in September that could involve a potential 2,545 properties. It is unlikely that any of these properties sold on auction will reach the assessed worth of their homes values.
In a series of related article on property taxation, they looked at property tax increases in just 4 counties in Pennsylvania. The article cited that property owners saw a 28% average increase in their property taxes over a time span of just 10 years. Then as you look into this deeper you find that some district saw only a 15% increase while other districts went up by more than 50% (http://www.philly.com/philly/news/pennsylvania/pennsylvania-property-tax-increases-bucks-chester-montgomery-delaware-county-20180227.html)
That article covered Bucks, Chester, Montgomery and Delaware county. In an earlier article the same research efforts discovered that more than 200,000 properties in the same counties were over-assessed which means they are paying property taxes on property they don’t really own because the assessment is higher than their home can be sold on the open market. That’s just four counties in the state but the story hold true no matter where you live in the state. There is simply nothing arbitrarily fair about property taxation. (http://www.philly.com/philly/news/pennsylvania/pennsylvania-property-taxes-assessment-20171214.html)
We not only have a system of taxation that robs us of our homes without just compensation to the property owner, we have a system of taxation that, because of faulty assessments, large numbers of properties are over-assessed paying more in taxes than their home is actually worth. It may be a stable source of revenue.
The most recent chart from the Independent Fiscal office shows the cumulative growth in revenue from the property tax, PIT and SUT.
What this chart doesn’t tell us is that the growth in revenue in the SUT and PIT taxes occurred without the need for tax increases in the generation of that revenue. On the other hand, the property tax required, literally, thousands of tax increases by the various school districts, municipalities and county government to generate that revenue with the largest contributing factor being increases by school districts.
For the half of the population in this state that lives below the median household income level, how do they prepare for such an assault in their burden of taxation?
Is it any wonder why the poverty rate is as high as it is in Pennsylvania considering how the property tax impacts to cost of everything in this Commonwealth.
These statistics come from the U.S. Census Bureau. The property tax plays a role in this and we shouldn’t ignore that. As the cost of everything increases while wages stagnate for those in the lower median household income bracket or with seniors on fixed income, poverty rates must increase. When those increases result in the tax seizure of a home and then that home is sold for a fraction of its worth on auctions with no consideration of the tax-payer we have despotism, not fairness in taxation.
It also plays a role in the increases in the cost of rent.
How do we continue to look at these charts and continue to talk about the stability of the property tax in relation to the people who are hit with the burden of providing for the tax?
The property tax steals from us in so many ways. It lowers the value of our homes denying us the equity we should have earned in that home. It makes us pay more for the goods and services we use. It robs the state of business growth opportunities and job creation. And then, eventually it can lead to the governmental theft of a home that allows them to sell that home on an auction without any consideration of the person who is actually supposed to own that home.
It is, in short and simple terminology, Theft by Taxation! It is precisely what Article 1, Sections 1, 8 and 10 of our Constitution is supposed to protect us from! It’s long past time that our legislators fix this egregious violation of our protected rights, eliminate the property tax and replace that revenue with a system that is fair and based on ability to pay. It’s time to stop talking about stability for the tax collector to look at the instability it is causing for the working families of this Commonwealth. It’s time to start creating tax policy that creates stability for the people who must pay the tax.
Yes, authority of law as it now stands allows for the seizing of property but that authority must include just compensation to the property owner according to article 1, Section 10. Since the current law does not accomplish that than the authority of such a law needs to be questioned because such a law operates outside the realm of the authority granted to it by our Constitution. That should make such a law void.