Public Education: Measuring Success in the Classroom in Pennsylvania

This is part three of a series of articles addressing the recent charges being levied against School Property Tax Elimination.  The charges are attempts at misinformation about the actual legislation (HB/SB 76) and deliberate misdirection away from discussing the actual results of the excessive spending.
A series of hit pieces has begun to pour out from School Board and Administrators in opposition to HB/SB 76.   These articles are basically a series of pieces intended to generate misdirection and in doing so often contain gross misrepresentation of the actual bill they are fighting against.

Stripped of their rhetoric, these articles defend the current system of education funding based solely on their ability to increase the revenue wants.  Not a single one of these articles actually produce any substantive evidence that spending more has achieved actual results where it matters….with the student in the classroom.

I’ve shared this chart in the blog before but it needs to be shared again:

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If success is to be measured only by the ability to spend more than our schools are successful but is this really the sole purpose of education?

Shouldn’t the real measure of success be found in being able to prove that the increase of spending has produced substantive results in the classroom?

The attacks against HB/SB 76 point only to the PSBA, PASBO and Administrators limiting their ability to spend more money at their sole discretion.  Not a single argument has been made that actually shows  all their spending wants have actually produced results when it comes to the child in the classroom.

There is good reason for that.  All the evidence is to the contrary.

The majority of our students are graduating from high school ill-prepared for college. They will require remedial training in one or more in the most primary purposes of our educational system: reading, math and science.

The National Assessment of Educational Progress (NAEP) tells us that compared to the first assessment in 1971 for reading and in 1973 for mathematics, scores were not significantly different for 17-year-olds in 2012.  That can be seen in the following chart (source: https://nationsreportcard.gov/)

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These results clearly tell us that the majority of our students graduate from High School without being proficient in the very subjects that should be the primary purpose of a public education.  In fact the study reveals that the longer the child is in the public education system, the lower the results of proficiency.  Why is Grade 4 8% more proficient in History than Grade 12?  Why is Grade 4 15% more proficient in Mathematics than Grade 12?

The real test of success of “education” should be the results produced in the classroom, not in the ability to spend more and more.

The only “success” of spending more has been to create the want to spend even more.

In all the hit pieces coming out of those agencies responsible for educating our children all they cite is a defense of wanting to spend more. There is no substantive evidence that this spending has actually done anything to improve the quality of education in the classroom. From their rhetoric, that is apparently not their goal!

The Pennsylvania Association of School Business Official (PASBO) sent out a report about the retained debt listing, school district by school district, the debt that will be retained by the schools once HB/SB 76 is passed.  This portion of funding will remain until that debt is paid in full.

They cite this ability to accumulate debt as a reason to oppose school property tax elimination but show no correlative data to prove that accumulating this debt actually translated into increased performance in education standards within the classroom.

Some of our opponents tell us that it isn’t the property tax that is the problem.  They tell us that we need to cut spending and that will solve the property tax problem.

I fail to grasp how you can reach the conclusion that the very thing (property tax) that allows the spending problem to grow isn’t the reason that spending has grown.   Any attempt to reign in spending now can be quickly undone in future years as long as they have open access and ease in increasing spending through something like a property tax.

To me this is like trying to cure cancer by treating the symptom and not destroying the cancer cells.  If your goal is to create a false sense of security by treating the surface symptom without curing the root of the problem; if you want to have to go to the doctor in perpetuity because the doctor treats the symptoms and not the root cause; then fighting to reign in spending and try keep it under control for eternity is the path to follow.

If you get at the root of the spending, or the ease at increasing the spending, then you actually create a scenario where future increases become much more difficult.  That’s what HB/SB 76 does.  It caps all future spending to the rate of inflation with regards to revenue currently seen through the property tax by eliminating the property tax and replacing it with a far more equitable system of taxation.

I am very disturbed by the talking points used by those School Board officials writing op-eds in newspapers that defend spending more for the sake of spending more while not demanding better results for our children in the classroom.  Of course, statistically, they can’t defend both.

I am equally disturbed by the depths of misrepresentation that these “officials’ are going to in demonizing this legislation.

Here are some examples from a recent article:

Opposition Talking Point #1: “They would divvy out based on cost per student and whatever ratio they come up with,” Thomas McMurray, school board president, said about the state’s role under a new funding system.”

FACT: Under HB-SB 76 there is no cost-per student adjustment.   Each school districts revenue currently collected through the property tax would be replaced at a dollar-for-dollar level and they would get annual increases on that revenue based on the rate of inflation.

Opposition Talking Point #2 “We are going to be at the beck and call of a state government who is going to choose how much money we get.”

FACT: Under HB/SB 76 the distribution of the funding is found in Chapter 13.  The funding is through the Treasury Department and is allocated to the schools totally exclusive and independent from the budget appropriations process in Harrisburg.

Opposition Talking Point #3 “If the state pulls one of these stunts where they don’t pass a budget and we don’t get our revenue, we would be in a major world of hurt compared with where we are today, because of the heavy emphasis we have on property taxes,”

FACT:  As stated above, budget negotiations will have no impact on the replacement revenue.  It is a separate account for the designated purpose of replacing the revenue through the Educational Stabilization Fund.

Opposition talking point #4:  “And if we want to do a special program and they’re not going to give us money, we can’t do the special program.”

FACT:  Under HB/SB 76 any special program the school board wants to accomplish can happen merely by making their case to the voters through a no-exemption voter referendum.  HB/SB 76 restores the actual concept of Local Control in that it restores control to the constituents in the school district.

As Thomas Jefferson said “I know of no safe depository of the ultimate powers of the society but the people themselves; and if we think them not enlightened enough to exercise their control with a wholesome discretion, the remedy is not to take it from them but to inform their discretion.”

 

As you see in these 4 talking points, once again we are not talking about defending the spending increases based on tested and improved results in the classroom.  Spending for spending’s sake remains their only defense.

We are doing our children a great disservice.  If the people responsible for the education of our children are not doing what is necessary to defend their positions honestly, how can we trust them to impart practical knowledge in the classroom that isn’t of a biased nature?

Increased spending in education has produced only one proven thing.  Increased Spending.  The school property tax has become the great enabler.  It has allowed the public to be deluded into believing they retain local control when this is no longer the case.  In many ways our General Assembly has surrender their responsibilities with regards to education to the state’s Department of Education which is largely controlled by the PSEA.

The books shown above consist of more than 3,000 pages of regulations pushed down on our school districts inflating the cost of education with no provable results except in increasing the cost of education.  These regulations are mostly unfunded mandates, many of which offer unique protective requirements of the Public Sector Unions.

Rather than direct their anger at the failures of the Department of Education, School Boards have simply surrendered to the concept of taking more money from the  people by making unjust claims to a right over our homes that was never intended when the property tax originated.  By defending their right to extort our property with no tangible results in the classroom they, by their words and actions, support the current system as it stand while opposing the rights rights of the individuals and families in their homes.  They deny that Article 1, Section 1 of our State Constitution applies.

We can not expect the PSBA, PASBO, Department of Education or the PSEA to support reigning in costs since they benefit from the ability to increase those costs through arbitrary means that work against the working families of this Commonwealth.  They will protect those self-interests even if such actions are detrimental to the economic well-being of this state.

The massive regulations being passed on to the local school districts happen because there is a property tax.  The Department of Education has no power of taxation, they are reliant on the local property tax to implement the myriad of regulations and requirements at the local level to defend and support the state’s Teacher’s Union.  This is NOT an indictment of individual teachers.  Many teachers are frustrated with what they see happening in their classrooms.

Rather than direct their anger at the failures of the Department of Education, School Boards have simply surrendered to the concept of taking more money from the  people by making unjust claims to a right over our homes that was never intended when the property tax originated.  By defending their right to extort our property with no tangible results in the classroom they, by their words and actions, support the current system as it stand while opposing the rights rights of the individuals and families in their homes.  They deny that Article 1, Section 1 of our State Constitution applies.

Success in the classroom is not to be measured by how much is spent or by how much a program costs to implement.  Success should be measured by the results in the classroom in improving the individual students performance and success.  By that standard, the increasing cost of a public education has been an abject failure.

When it comes to public education, the status quo is broken.  It calls for a radical departure away from tradition for tradition’s sake into bold new areas.  It’s time to stop defending the indefensible.  It is time to seek new common-sense paths in education.

HB/SB 76 restores a portion of economic liberty by placing it in the hands of the people to reinvest in their communities and the business environment.  It makes Pennsylvania more attractive to businesses by eliminating the egregious and regressive property tax which will generate more jobs, more income and more revenue for supporting the things that are important to us.  It will help to curb the growing problem of out-migration.

Most importantly HB/SB 76 removes the isolation of property ownership  in the funding of education restoring the rightful ownership of that property to the individual where it can no longer be pillaged by the school district to meet their unwarranted demands at their discretion.   It destroys the most unfair and regressive form of taxation in the funding of education that exists.

In closing, Albert Einstein is broadly credited with exclaiming “The definition of insanity is doing the same thing over and over again, but expecting different results”. That certainly applies to those who continue to defend the indefensible-the property tax!

 

PSBA (Part 2) – Exacerbating The Inequities!

This was intended to be a two-part series in response to the recent opposition piece by the PSBA (Pennsylvania School Board Association).  It will take me longer than that to accomplish this goal due to the number of gross misrepresentations and misdirection in the PSBA letter.  You can read part 1 here.

The PSBA letter is rife with contradictions.  While condemning HB/SB 76, much of the criticism is an attempt to  deflect since the criticism of HB/SB 76 made by the PSBA can and should be levied at the existing property tax.

The PSBA makes the claim that “the school funding inequities will be exacerbated.”

There is no doubt that the current system is filled with inequities.  There is also no doubt that the school property tax allows these inequities to continue to grow.

The PSBA goes on to say that this plan will undo the work recently completed to enact a new basic education funding formula.  The claim is made that school districts will be placed in a system that lacks equity and predictability.

George Orwell, in his classic novel 1984, referred to this type of rhetoric as doublespeak (language that deliberately obscures, disguises, distorts, or reverses the meaning of words).

There is nothing equitable under the current funding system through the property tax.

The PSBA then brings the Basic Education Funding Formula into the debate which is a separate and seriously flawed method of distributing state collected taxes back to school districts.

It is true that the Basic Education Funding Formula (BEF) was recently updated but it is also still seriously flawed.   Part of the reason is because of the unpredictability of the school property tax.

Many School Districts in areas where we find lower household income are forced to do their budget planning before the distribution of the BEF allowing them to operate on a Zero Budget concept claiming they don’t know how much funding they’ll get from the state.  They then find an exemption under Act 1 that allows them to exceed the caps that Act 1 is supposed to contain.  The Department of Education then rubber stands the approval of that exemption.  With the budget approved, the local taxes increase and then the funding through the BEF comes in from the state generating more revenue for the school district.  It then becomes the school district’s OPTION, not requirement, to adjust their funding through the local tax increase.

None of this is by accident.  It is designed to work this way.  The school districts and the PSBA have done nothing to change that.

When you look at cost per student, which is where the inequity argument is coming from, you find that it varies greatly from school district to school district.  The difference can amount to $10,000 or more per student.   All that happened under the school property tax because the school districts can….and do!

It is disingenuous to make such a claim about the inequity through HB/SB 76 when it is the existing school property tax that has allowed these inequities to become what they are.  Obviously if we maintain the status quo, those inequities are going to continue to grow just as the historical records proves.

Passing HB/SB 76 will actually create a stable and predictable revenue stream for each of the 500 school districts.  It will allow the BEF to be reformulated based on the predictable revenue generated by the change to a different funding mechanism.  Each school district receives what they are currently receiving adjusted annually by the rate of inflation.

It will create a path to undo the inequity that came into being because there is a property tax.

When HB/SB 76 was formulated it was designed as a mechanism solely to replace the property tax.  We were fully aware of the problems with the BEF and have always encouraged our legislators to do what is necessary to correct those problems.  It is, however, a different issue.  It is separate from the BEF.

The PSBA article goes on to say “School Boards need to be able to use a mix of local taxes and the development of available funding bases that are suitable to each school district’s unique economic capabilities and conditions.”

HB/SB 76 doesn’t touch any of the current Act 511 taxes currently available to school districts as alternative revenue streams.  HB/SB 76 includes an allowance for school districts to make an appeal to the residents in the community for an alternate tax to be used for special projects.  The only requirement is that it must go before the voters in a no-exemption ballot initiative and that the property tax can not be used to fund it. A local income tax for the project would be levied that has a sunset date.  When the funding for that project is paid for, the tax goes away.

That simply common-sense.

When you strip away all of the rhetoric in this recent mailing it still comes down to this:  The opposition from the School Boards and the PSEA is an opposition to restoring property ownership to homeowners.  It strips the PSBA/PSEA of their ability to tax at will requiring them to conform to the control of their local communities to determine future projects within the school district.

If you truly want to exacerbate the inequities in school funding then you will fight to maintain the Status Quo…the current system of school property taxation.

If you truly want to create a path to leveling the field and putting an ending to the inequities….HB/SB 76 is a step in the right direction.

Nowhere in this PSBA letter does the PSBA address the current inequities of homeowners through the property tax where properties of equal value are taxed at different tax rates through the millage.  Two homes on opposite sides of the street may find heavy differences in their property taxes simply because those homes are in different school districts.

You can read more about those inequities here.

Nowhere in the PSBA article do they address the inequities of the current system of assessments to determine property worth.  In every county-wide reassessment, the appeals follow.  Those appeals are largely in favor of the homeowner revealing how flawed the assessment process is.  It allows for larger corporations to bring in their legal teams and fight their assumed assessed value and when they win those cases, as they often do, the lost revenue is thrown back to the rest of the property owners in the district.

It is a seriously flawed system for funding one of the most essential assets in our Commonwealth: the education of our children.

 

 

 

 

SB 76: The Myth of the Shortfall

SB 76: The Myth of the Shortfall

Or,

The Art Of Misdirection

Opponents of HB/Sb 76 like to point to the fact that 10 years down the road we’ll be creating a shortfall in education funding.  The implication is that we’ll be cutting the education budget by billions of dollars.

The source for this information comes from the Independent Fiscal office.

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This type of debate is sometimes called misdirection.

Under HB/SB 76 the replacement revenue distributed to schools is a dollar for dollar replacement of the revenue currently collected through the property tax.  Each school district will receive exactly what they are receiving now through the property tax.  That amount will be adjusted each year by the inflationary indexes currently in place which means that school districts will continue to get increases every year set to the rate of inflation.  There are no cuts in education budgets.  School Districts budget will still be able to increase with the rate of inflation.

In fact, school districts that have been frugal and fought against increasing property taxes in the past would have actually seen increases in funding under HB/SB 76 had this bill been passed when introduced.

Let’s look at this by extending the above chart 10 years out focusing on three factors.  Maintaining the current increases in property taxes, The Average Weekly Wage, and the regional Consumer Price Index.

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On the chart the difference between the Average Weekly Wage and the property tax is about .60 in cumulative growth in 2012-13.  By 2012-13, that difference will be 1.2 or doubling the increase in property tax revenue compared to the Average Weekly Wage.  Will you be able to afford that kind of increase?

Comparing property taxes to the to the rate of inflation, the difference is slightly greater.

What happens when we move the rate of inflation growth up to the existing school property tax line?

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School funding continues to increase but it does so at a much lower rate.  It also begins to close the gap between the Average Weekly wage and School funding through HB/SB 76.  In 2012 the gap is 0.60 and in 2022 that gap will be about 0.50.

Something that is not reflected in these charts is the decline in population due to out-migration.  We lost almost 8,000 people last year.   That translates into less people paying more towards the rising costs and disparities of the property tax.

Lets assume for a moment that this trend continues.  In ten years we’ll have lost about 80,000 people.   The Census Bureau tells us that the average household is 2.64 people.  A loss of 80,000 people translates into a loss of 30,303 households.  That’s 33,303 households not paying the school property taxes in 10 years that currently would be.  That simply means that with less people funding education through the current system the remaining households will have to pay a higher share of the property tax revenue as the total cost of the property tax continue to increase.

If we continue on the same course of action maintaining the status quo we find certain instability in the future for the majority of working families in the state.

When our opposition talks about the increase to the PIT/SUT on the working families of the Commonwealth they intentionally choose to ignore that current system and future it will bring to those same people.  They are often seeking to protect their own interest even if doing so means hurting the people they claim to be defending.

After all, that’s what’s been happening while those same naysayers (and others who have followed in their footsteps) have prevented School Property Tax from advancing in the past.

This process is a process of misdirection.  School Administrators and advocates for the PSEA come out of the woodwork and talk abut the impact on the poor and because they don’t want you to look at things like this:

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The runaway cost of funding education is not reflected in population growth nor can it be justified with higher test score results.  Rather than irresponsibly increasing the cost of education, allowing for Ghost teachers that are paid as school teachers but doing the work of the Public sector unions;  Rather than protecting the unique provisions to these unions that aren’t actually translating into a better quality education for our children; they fight to keep increasing the financial burdens on their communities.

Many of our 3rd class cities are struggling.  The increasing school district taxes have hit the municipalities where we find cuts in services like road repairs, police protections and cuts to health and safety departments.  Home ownership declines to be replaced by rental properties where the rent just keeps rising.  This contributes to transient populations which becomes a contributing factor to rising costs in education.

While they talk about the negative impact of Eliminating School Property Tax through HB/SB 76 on renters, they are misdirecting us away from this:

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A comparative study to the increase in rents correlates perfectly to the increase in property taxes.  This is just common sense.  When you increase the taxes on a rental property the owner of the property must increase the rent or they’ll lose the property.  To pretend that the existing system of property tax has no impact on renters is simply delusional.

If we don’t put an end to the status quo rent will continue to increase to the same rate as property taxes.  Eliminate the property tax and you stop that growth limiting it to the rate of inflation.  In other words, maintaining the status quo will have a hugely negative impact of the cost of rent in the future.  To the opposition, we are just supposed to ignore this.

Had we done this 20 years ago, imagine how much renters would have saved?  If we had done this 20 years ago how many renters would now be home owners?

After all, we are trying to open doors of opportunity through HB/SB 76.  The current system closes those doors and keeps that door securely locked.

When our opposition talks about centralized funding and the loss of local control they want you to ignore this:

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These books represent some of the regulations and unfunded mandates that drive up the cost of local property taxes implemented at the state level.  Each of these books are full and printed double-sided.  It’s thousands of pages of control over our local school board’s much of it granting special and unique privileges in favor of the PSEA.

When our opposition talks about 17% increase in the sales tax they use the percentage as a distraction.  It means that if you buy a $1,000 big screen TV for your family room you currently pay $60.00 in Sales Tax.  Under SB76  you’ll pay  $70.00 and in exchange for that you get your school property taxes eliminated.

When our opposition talks about this being a tax break for the wealthy they will never tell you that the wealthy are making out considerably better when we look at percentage of income in relation to the school property tax under the current system.  We have wealthy districts where the percentage in income is less than 2% of of the average income going to the property tax and in poorer districts where it’s as high as 15%.  I have never once heard the opposition who is supposedly so concerned abut the plight of the poor ever once condemn the most regressive tax in the entire Commonwealth, the school property tax.

When they talk about the tax breaks to Walmart by eliminating their property tax in compliance to the Pennsylvania Constitution they don’t tell you that Walmart makes up a small part of the landscape when it comes to employees.  What they don’t talk about is the fact that businesses with under 20 employees still make up the largest majority of workers in the commonwealth.  Those businesses would also see their property taxes disappear allowing them more income to invest back into their business to become stronger competitors against the corporate chains.  That investment may include higher wages for their current employees.  That investment could mean hiring more staff to meet consumer needs.  That investment could mean lower competitive pricing. All of that is good for Pennsylvania.  Walmart is just the distraction to hide the benefits of HB/SB 76 to small mom and pop businesses across the Commonwealth.

When our opposition talks about the stability of the tax they never put that stability in context.  As the chart above indicates, it’s is stable in its increases.  It is stable for the tax collectors and the tax leviers because many people will do without healthcare and food before they lose their homes.  The stability for the tax leviers and collectors is predicated on the instability it causes for the working families who have to pay it.   So much so that more than 10,000 people a year face losing their homes because the tax has exceeded their ability to pay.

Another tool of misdirection is to completely ignore the intent and purpose of the bill.  HB/SB 76 is a bill to eliminate the School Property Tax by finding the replacement revenue necessary to return to each school district, dollar for dollar, what they currently receive.  We recognize that there are other problems.  The Basic Education Funding Formula is seriously flawed.  That needs to be fixed but that isn’t what this bill is about. The Public Sector Pension Plan is a debacle.  That isn’t what this bill addresses.  We need separate bills to deal with these other problems in responsible and equitable ways.

When opposing legislators do this it’s particularly troubling.  Using this bill to point out that it doesn’t address those problems when those legislators have not introduced bills to deal with those problems is disingenuous.  It may help them maintain the status quo but at what cost to the taxpayers of this state?

When our opposition says this bill needs to be vetted more they don’t tell you that this been has already been vetted more than any other bill.  It has gone through three IFO (Independent Fiscal Office) studies as well as other outside groups.  It’s all about misdirection.  When that misdirection comes and those misdirecting know the truth but intentionally keep the truth from the public, that misdirection is a form of dishonesty.

Much of our opposition comes from Administrators, CPA’s, those strongly connected to the PSEA and other educated professionals where I find it incredibly hard to believe they do not realize what it means to protect the status quo of school property taxation and the negative impact this has on homeowners, small business and our communities and yes, even the negative impact it has on the children in our schools.

So much of their opposition is easily exposed. In fact, since they went public with their opposition their talking points have been addressed and exposed.

In response, they never address the facts….they simply just keep repeating the same old tired and worn out excuses.

Most of our opposition is based on misdirection and misrepresentation and some of that is covered elsewhere in this blog.  I encourage those who are unfamiliar with this blog to spend some time here: Read the other postings.

I also encourage you to go to www.ptcc.us and get the facts behind SB/Hb 76, School Property Tax Elimination.

Keystone Opportunity Zones

Facing serious budget issues, Pennsylvania is now pulling back on one of its signature economic development programs.  The administration of Democratic Gov. Tom Wolf has sent rejection letters to Philadelphia, Coatesville and other municipalities that submitted applications to the Keystone Opportunity Zone program. The rationale is that the state simply can’t afford it.

The Keystone Opportunity Zone (KOZ) program, which provides deep tax breaks in hopes of revitalizing abandoned, blighted, or underused properties, has long been touted by state and local officials as a success story. They say it has helped create nearly 10,000 jobs and pumped $1.5 billion in private development capital into communities, often in distressed areas.

While the KOZ appears, on the surface, to be a needed asset is revitalizing communities, one of the principle reasons for the KOZ coming into being is the heavy burden of property taxation.

There are many negative aspects of the KOZ.  While they attract business to communities they do so by shifting that tax burden on the rest of the people.   We invest in those businesses through higher taxes, especially through higher property taxes.  For every successful KOZ there are dozens that tell a very different story.

Once the tax abatement program ends those businesses seek some other place to locate and all that investment from the local taxpayers is for naught.

Another problem with the KOZ is that it creates an unfair tax advantage to one business which negatively impacts the existing competing business that have already contributed to the state and community.

Bad tax policy like the runaway property taxes in this state becomes an excuse for government programs like this where we talk about things like the 10,000 jobs and $1.5 billion in private development capitol.  What we don’t talk about is the actual cost of these programs.

The Keystone Opportunity Zones is a part of Pennsylvania’s Department of Community and Economic Development .  It divides the state into 12 regions each with it’s own office.

Pennsylvania’s Department of Community and Economic Development (DCED) employs 365 people.   77 of those are paid hourly.  Hourly wages range from  $17.15 to $74.06 an hour.  63 of those 77 employees make $45/hour or more.

The total cost for the remaining salaried employees comes to just under $20  million each year ($19,993.321).  Granted not all of this is specifically related to KOZ  but it does demonstrate the economic cost to taxpayers in just maintaining these bureaucracies. The DCED is also home to the The State Tax Equalization Board (STEB).  STEB was established by the General Assembly in Act 447 PL 1046, 1947, to compensate for the lack of assessment uniformity statewide in distributing school subsidies.  As a result of Act 2 of 2013, STEB staff became a part of the Department of Community and Economic Development (DCED). STEB is often referred to as the Tax Equalization Division (TED) within DCED.

STEB is only necessary because their is a property tax.  It’s another cost to taxpayers that would be unnecessary if we eliminated the property tax and went to a more equity system of taxation.

The DCED is just one of the State’s 33 Agencies.  We also have 14 state offices and 27 Offices and Commissions.  Each of these operate under the Executive Branch (The Governor) where little oversight is available to the Legislative (General Assembly).  Pennsylvania has nearly 80,000 state government employees work for Pennsylvania in just about every field imaginable. From auditors to auto mechanics, cosmetologists to computer programmers, scientists to security officers. Each of them a member of public sectors unions and eligible for the state lucrative Pensions and healthcare benefits paid for by the working families of this state.

When we think of Keystone Opportunity Zones we generally think of Manufacturing jobs but that’s simply not the reality.  Manufacturing jobs make up less than 10% of the KOZ landscape.  Financial Services make up the largest percentage as the chart from the DCED below reveals.

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Keystone Opportunity Zones (KOZ) and Keystone Opportunity Expansion Zones (KOEZ) are geographic areas that can provide specific state and local tax benefits but those benefits as transferred to the remaining taxpayers.

In a KOZ, the business property owners pay the same reduced amount of taxes for a decade no matter how much they improve their property, or how much its value increases. They will only pay at the full rate after the KOZ expires.

Spokespeople for the Pa. Department of Community and Economic Development (DCED) said they do not currently keep electronic records on the number and location of KOZs.

In 2009, the state’s Legislative Budget and Finance Committee analyzed the program. Its report was scathing. It found that KOZ program records are “poorly organized and incomplete,” and that DCED doesn’t monitor the type of business activities or number of jobs companies generate. The committee also found that many companies weren’t creating jobs or luring new investment capital, and the program didn’t require them to.

The problem here is that we still don’t really know the effectiveness of the KOZ.  While supporters and the DCED are quick to point to the successes there is too little discussion of the failures which far outnumbers the successes.

In our opinion this betrays a trust in Pennsylvania Government as to how our tax dollars are being spent.

In 2014 Philadelphia City Controller Alan Butkovitz is sitting, the Keystone Opportunity Zone program in Philadelphia is a major disappointment.

Butkovitz released a report  saying that the program, which waives nearly all business and property taxes for 12 years, has presented an exceptional burden to taxpayers for a meager return. The KOZ program has cost the city and school district more than $380 million in abated business and property taxes since it began in 1998, according to the Controller’s report. In return, it’s netted $132 million in wage taxes from the 617 businesses that have benefited from the program. What’s worse, more than 70 percent of the wage-tax revenue came from businesses that were already paying taxes in the city before participating in the program.

It’s created just 3,700 new jobs since enacted. For each new job, the Controller said, the city has waived more than $100,000 in taxes. At an average salary of $50,000 per job, it would take more than 50 years of wage taxes for those new jobs to pay for themselves.

And after all that, more than half the land within Keystone Opportunity Zones is still vacant.

“These findings are consistent with the literature in urban economics, which holds that diffuse tax incentive programs such as the KOZ are an ineffective tool for enhancing economic growth,” the Butkovitz report concluded.

In some cases, developers have enjoyed tax relief without actually building anything.

In Brewerytown, developer John Westrum owns an empty block across from a townhome community he built a few years back known as Brewerytown Square. The owners of those townhomes now enjoy the standard ten-year tax abatement for new construction, but Westrum has also paid no property taxes on the adjacent vacant lot for the past ten years, since it was part of a Keystone Opportunity Zone.

On Columbus Boulevard, the property owned by Waterfront Renaissance Associates that was once slated to become the Philadelphia World Trade Center, has also enjoyed KOZ benefits, even though it’s been empty for decades. Development plans at the site were caught up in a morass of legislation and litigation that led to the demise of both the Old City Civic Association and the River’s Edge Civic Association. But year after year, the KOZ was renewed, because the program has no participation requirements.

DCED has changed the KOZ program since then. Now, a company that relocates to a KOZ must increase its full-time employment by 20 percent within the first full year of operation or invest 10 percent of the prior year’s gross revenues in the property. There’s no rule saying employees have to live in Pennsylvania. The Department also now monitors the number of jobs a company has created and retained.

Programs like the Keystone Opportunity Zones are among the most common economic development programs in the country. But Good Jobs First considers it an “old, unfocused, and outmoded” approach to economic development.  Good Jobs First, a national organization that studies development subsidy programs, gives the KOZ program a score of 0/100 for disclosure, and a 23/100 in terms of monitoring and enforcement.

In concept, the KOZ is a good program built on sound economic principle.  In application, or should we say through government control and interference, a good concept can turn into a bad idea.  That certainly seems to be the case with the KOZ program.

A KOZ is a government program that allows the government to pick the winners and losers.  Regardless of the spin, when there are losers it will be taxpayers because the system is built on funding from an archaic system of property taxation.  By the time the state realizes they can’t afford it the program, taxpayers have already lost.  When it comes to losing, when it drove up their property taxes that loss may have included the very home in which they have lived and raised their families.

By shifting away from the property tax and moving to a PIT/SUT based tax for school property taxes we could eliminate much of the need for the government bureaucracies while offering school property tax free  zones across the entire commonwealth driven by local government incentives to bring new business to their community that doesn’t rely on shifting that burden to the remaining property owners. This maintains the intention and concept of the KOZ without relying on government funding to do it.

It’s a radical concept that supporters of the Status Quo choose to reject even though it’s clear that the Status quo isn’t working and it’s time for something different.  It’s not very hard to figure out why the Public Sector opposes such an effort….it’s called job security.  Even though reducing the need for government state workers is beneficial for the state in saving millions of dollars in tax revenue, much if which  would go back into the economy and business community, it also means eliminating jobs within government and those dues are the public sectors bread and butter.

The passage of HB/SB 76 would allow local and state revenue to be targeted to more specific needs rather supporting a questionable program when it comes to reducing the tax burden on Pennsylvania working families.

The are distinct benefits of eliminating the school property taxes in order to attract new business to that state but KOZ are limited and completely controlled at the state level through the DCED.  While the KOZ is good in its concept, it’s application and government controls have failed to deliver on their promise to Pennsylvanians.   At the same time it caused for a expansion of the bureaucratic affairs at both the local and state levels.   It shifts the tax burden to others while punishing established competing businesses in the community.

HB/SB 76 is a step in the right direction of maintaining the concept of KOZ without the need for government Bureaucracies and interference as well as without shifting burdens to others.  In short, it undoes the tax shift that the KOZ creates while still maintaining the concept and purpose of the KOZ.

 

 

Out-migration, Property Taxation and Pennsylvania!

The figures are in for Pennsylvania’s out-migration and, once again, it doesn’t look good for Pennsylvanians.  The measure of good-government isn’t in it’s political spin but in the reality of the environment in which we live.  Once again Pennsylvania scores badly as  more Pennsylvanians are choosing to live elsewhere..

The Census Bureau reports Pennsylvania’s total population fell by more than 7,600 from 2015 to 2016.   We are one of just eight state that actually lost population.  While 34,678 people migrated to the state the net out-migration was 45,565.  When you calculate births and deaths the total loss to the population of the Commonwealth, you’ll find there was a total loss of 7,677 people.

It’s no secret that states with lower tax burdens are faring better than states with the higher tax burdens.  People leave Pennsylvania for a more friendly tax environment.  They leave Pennsylvania to follow jobs in other states: jobs that aren’t here because of the burden of the tax environment in the state.

Let that sink in for a moment.  We invest in a child’s education, as we should.  That child will spend 12 years in the tax-payer funded public education system.  Then, for many, it’s off to college.  Depending on where they go to school, that means more tax-payer money.

In 2014 111,000 students in higher education attended one of the 14 campuses of the Pennsylvania State System of Higher Education.  Pennsylvania’s State System of Higher Education (PASSHE) is the largest provider of higher education in the Commonwealth of Pennsylvania and a large public university system in the United States. It is the tenth-largest university system in the United States and 43rd largest in the world.

It’s not just the Pennsylvania State System of Higher Education. Pennsylvania’s other state-funded university system is the Commonwealth System of Higher Education (Lincoln, Penn State, Pitt, and Temple Universities).  The Commonwealth System of Higher Education establishes the schools as an “instrumentality of the commonwealth” and provides each university with annual, non-preferred financial appropriations.

Then there’s the grants and subsidies offered to other Higher education institutes like community colleges.  The 2016 budget for higher education came to $744.9 million dollars.

Pennsylvania spends about $30 billion each year on education.  Almost half of that comes from school property taxes with the rest coming from the Sales/Use tax and monies appropriated from other collected taxes as appropriated by our General Assembly.

The return on that investment for those who still live in the state is to watch the college graduates leave the state and then take their future income and invest that income in another state.  For every student who graduates and then leaves the state to work elsewhere, the Pennsylvania tax-payer sees no return on their investment towards that education.

We also see where Pennsylvania’s investment in the retirement of Public Sector workers is not producing its contracted obligation leaving us with a $60 billion plus unfunded-liability in the state’s pension obligations.  One has to question how many of these people are retiring elsewhere other than Pennsylvania where the tax-payer’s investment in their retirement once again goes to benefit the residents of another state.

It should be obvious that Pennsylvania has a spending problem that is leading to higher taxes and that leads many to suspect that if we could control the spending we could reduce the tax burden on the residents of the commonwealth opening doors for job creation and retaining our population with jobs and a lower tax burden.

It seems like the easy option and that’s the problem with the cut-spending mentality.  It looks at the cuts today as a win but never guarantees perpetuated results.  Spending cuts this year are never going to become permanent cuts.  It will be a constant annual battle in budgets and appropriations where the loser is always going to be the working family of the Commonwealth.

Any real reform on taxation must include caps on future spending to prevent the ease of future administrations and legislators from undoing any spending cuts we can obtain now.  I’m not saying we shouldn’t pursue spending cuts to ease the tax-burden on working families.  I’m just saying that if we think that will automatically translate into long-term tax savings were are mistaken.

Those of you who have followed my published blog know that I advocate for total school property tax elimination through House Bill and Senate Bill 76.   I am continually frustrated by those who oppose this legislation while calling for spending cuts.

In a recent post by the Commonwealth Foundation  they call for spending cuts.  They make the claim that “lower taxes starts with limiting government spending. Had Harrisburg limited spending growth to inflation and population since 2000, Pennsylvanians would be saving nearly $22.2 billion in taxes, or $6,952 per family of four.”

Here’s the thing…I agree with the Commonwealth Foundation on limiting spending growth to inflation and population so why don’t’ they agree with us on HB/SB 76.  That’s exactly what HB/SB 76 does.  HB/SB 76 caps future spending on the replacement revenue needed to eliminate the property tax to the rate of inflation and population and yet the Commonwealth Foundation will not support this legislation.  HB/SB 76 guarantees that this replacement revenue grows but is limited to inflation and population.

HB/SB 76 is also a clean bill.  It isn’t a corporate welfare bill.  It treats the business community the same way it treats the homeowner in eliminating the annual school tax on the property owned.  We don’t cut out millions of dollars and divert that into the programs where the state picks the winners and losers.  We also eliminate the needs for tax-payer subsidized property tax programs like KOZs and LERTAs.

In other words, we begin to break down the need for government agencies in administering government programs that become unnecessary under HB/SB 76.  This is another thing that the Commonwealth Foundation talks about as being a necessity and yet, when you give them a bill that delivers, they won’t support it.

Well-crafted legislation like HB/SB 76 that is written by the people will account for future spending by limiting the ability of the legislators to spend at will. HB/SB 76 realizes that there may be local need for revenue like new school renovation or construction or other locally driven need and it leaves that open through alternative funding but only when actually approved by the community.

We simply can’t expect to win the battle over our property taxes at the local level because much of the spending is driven by  Harrisburg.  HB/SB 76 realizes that accountability should lie with the state because they are the originators of the unfunded mandates that are paid for through a local property tax.  It is the state that paved the path for the pension debacle.

I suspect that is also behind why some legislators would oppose this type of legislation.  After all we’ve seen many, including the recent op-eds by the likes of Lt. Governor Mike Stack and Senator Gordner, who roll out their excuse talking points citing “facts” that just aren’t facts according to the actual bill.  When presented with the facts from the bill their tactic is to change the subject: never to admit that we are right and admit that their talking points are wrong.

Equally frustrating to me is the way the talking points referring to shifting to the Sales tax as a regressive tax while ignoring that the fact that the property tax is far more regressive.

When it comes to the sales tax if you purchase a $50 sales-taxable item you’ll pay a 6% sales tax on it.  That will cost you an additional $3.00 regardless of your income.  Under HB/SB 76 you’d pay an additional $0.50 cents to help provide the replacement revenue needed for the property tax.  Obviously if you spend more, say $250 on a sales taxable item, you’ll pay more total sales tax ($15.00) but it’s still only 6% of the cost.  Under 76 that would be an additional $2.50.   The more expensive item garners more tax revenue but it’s still only 6%…under HB/SB 76-7%.

The same applies to the PIT tax.  You currently pay 3.07% in Personal Income Tax.  If your family is earning $50,000 a year your family is paying $1,535.  The family earning $250,000 is paying $7,675.  The higher income family pays more to total taxes but it’s still the same percentage.

The Sales Tax and the PIT have not seen the increases that the property tax has.  The IFO report from 2013 on HB/SB 76 reported that the revenue generated by the Sales and PIT tax increased over the last 20 years even though the actual percentages did not increase.

Contrast this to the School Property Tax.  Chances are real good that your property taxes have increased substantially over the past 20 years.  The revenue generated from the property tax increased by 149% in the last 20 years but that’s because the millage rates have increased and the common level ratio has also been adjusted, unlike the sales or the PIT tax.

Also unlike the sales tax or the PIT tax, the amount of money you pay on your homes as a percentage of home worth varies from county to county and from school district to school district.

The median property tax in the commonwealth is supposed to be, according to tax-rates.org, $2,223.00 per year for a home worth the median value of $164,700.00.  That’s not really how it works though.  By that reasoning a $50,000 home should see a property tax bill that is at least 2/3 less or $741.00.  That’s not what we see though.

I’m going to use Lebanon County again because this is where I live.  The millage rate in Lebanon city is $27.9135 per thousand dollars of home value.  The property taxes on a $50,000 home in the city would be $1,395.68 which is much higher than one would assume looking at tax-rate.org’s numbers.

Let’s take tax-rate.org median numbers.  The $164,700 median assessed home would pay $4,597.35 in property taxes if it was located in the city or $2,374.35 more than the state average for property taxes.   A home assessed at the same value in North Cornwall would pay $3,182.37.  That’s still more than the state average but it’s also $1414.98 less than the taxes in the city limits even though those homes may simply be across the street from one another since North Cornwall borders the city limits.

We hear all the time that HB/SB 76 rewards the wealthy while punishing the poor.  The median household income in the city limits is about $32,000 in the city.  The median income in North Cornwall is about $50,000 yet the property taxes on a $164,700 home would be more than $1,400 less than it is in the city.

This is what led West Lebanon, where the children attend the city schools, to consider requesting a redistricting of their municipality to send their children to the Cornwall-Lebanon school district: they are fighting for lower property taxes.

To begin with a home is assessed at a value that very often does not reflect actual selling price.  In fact, the assessed value is usually higher than the price the home can be sold on the open market.  That already makes the property tax different from Sales and PIT tax.   With both the Sales and the PIT tax we see a tax on an actual value.  That value is determined by the market, not by some government hired assessment company.

As the market fluctuates, wages and the cost of our sales-taxable goods also fluctuate.  It an economic recession home values can drop drastically but that drop in value will never see a like adjustment in the property taxes on a home.  In fact, looking at the historic trends, during a recession taxes actually increased on homes whose values had dropped as a result of the recession.  That’s what our opponents like to call stability.

That’s what I call paying taxes on property you don’t actually own.  If you home is assessed at a value that is higher than it can be sold on the open market your are paying taxes on property worth you do not own.  That’s not stability…that’s extortion!

The government doesn’t hire people to assess the taxable value of the item you purchase or the wages they think you should be earning and then tax you on that imagined value.  Your home, however, is taxed based on an assumed worth.

Lt. Governor Stack also make’s the claim that the business community pays 25.6% of the property tax burden.  That’s true (sort of)! What’s wrong are his conclusions.

His logic for his opposition is that we must continue to punish the 74.4% of the homeowners to avoid giving business an elimination of the school property tax.  What he doesn’t tell you is that the homeowners paying property taxes pays 100% of their own property taxes even though their property earns no income and then they pay the property taxes for the business community through higher prices for goods and services making it more difficult for those businesses, especially smaller businesses, to remain competitive.

In fact, the system of property taxation gives an unfair advantage to the larger more-corporate box stores.  The larger stores can spread that cost of their property tax over pricing on more goods than it’s smaller counterpart giving the larger store a competitive edge over the smaller family-owned business that has nothing to do with the market and everything to do with government control through taxation.

When you factor in the “Cascade Effect” of the property tax we are paying much higher prices for our goods and services than we should be paying all to support a system of taxation where the only uniformity is its non-uniformity.  It is uniform only in that its variance from district to district and even from home to home is consistent and guaranteed.

Using taxation to force cost on to the consumer has never worked well for the consumer or for the business.  Driving up the costs for our goods and services through taxes that are passed back down to the consumer only limits the purchasing power of the consumer giving them less total disposable income that could go back in to the economy.

When the consumer is determining how and where his hard earned income is spent there is more economic freedom.  Why the government decides, there is tyranny no matter how benevolent that tyranny is to those the government determines should benefit.

It’s not like the business owners, the CEOs and the managers are suddenly exempt from paying taxes to help fund education but that’s what Lt. Gov. Stack would have you believe.  Those owners, CEOs and managers will still be paying the PIT and the Sales /Use tax for their personal purchases just like the rest of us.

The Lt Governor says “That plan (HB/SB 76) would have hurt small businesses as well. Because many local mom-and-pops pay the personal income tax rate, it would have shifted a huge chunk of the tax burden from big companies (often headquartered in another state) onto the backs of small ones.”

Well gee, the headquarters in another state already isn’t paying property taxes in this state on that headquarters building so what’s his point.

Does he mean to imply that the local managers in that corporate-owned business aren’t paying a PIT tax or don’t pay a sales tax when they go out shopping with their family? Besides, the corporation isn’t paying that property tax….they are adjusting prices so that the rest of us are paying for it.

We’re also seeing a rise in the corporate-owned chain stores using their legal teams to fight back against the property taxes and appealing their assessed values.  When they win, and they often do, guess where that lost revenue gets redirected….on to the rest of the community through higher millage rates on everyone else including on the backs of those smaller mom-and-pops who can’t afford to legal teams to fight their assumed and assessed property worth determined by a government-hired assessment company.

It is the existing system that pushes things on to the backs of those same mom-and-pop stores Stack claims to want to protect.  The property tax is hurting those businesses.  The high property taxes in malls drives up the cost of rent making it harder for the mom-and-pop to compete in the convenience of the mall environment where the shopper has ease of parking and  protection from the weather while shopping.  Without the property tax. mall rental space would be lower making it easier for the local mom-and-pop to establish a business in that environment.  Look at your local mall food court…how many of the restaurants are completely locally owned and not part of a major chain?  Look at the shops in those malls.  How many are locally owned mom-and-pops and not part of a chain?

Now ask yourself why?

Certainly reigning in government spending would help ease the burden but it won’t fix the disparity of the property tax problem.  Cutting spending at the state level for education funding without reducing many of the mandates and the bureaucracies involved in education will only result in higher education costs through the local property taxes.   Without the elimination of the property tax the legislators have no need to fix the unfunded mandate problem because they don’t have to be held accountable for the tax increases they mandate that take place at the local level.

The pension problem we face in this state will never be dealt with the way that it needs to be as long as the state legislators can pass the responsibility of paying for it down to the local property owners. Paycheck protection will never be viewed as the important issue it is as long as the property tax exists because they can shift that responsibility down to the local school district.

Keeping taxes in check at the state level is a good thing as long as institutions like the property tax do not exist where the cost can be tax-shifted to local communities driving up their property taxes and making them pay more for the goods and services they purchase and use at the local level.

Cap that funding into an account that is sealed from budget appropriations the way HB/SB 76 does and the responsibility for the unfunded mandates reverts back to Harrisburg where they would have to become accountable for the spending.  That then becomes the only way to realize the spending cuts necessary to do what must be done and to see those cuts become more permanent in nature.

Place all future local increases into a no exception voter referendum contract that way HB/SB 76 does and you restore real local control to the locals.

You see, to my way of thinking HB/SB 76 isn’t just a good bill for the issue of property tax elimination.  Its mechanisms should be studied and applied to every reform measure the state faces.  It should become the shining example of the way things should be done.

 

 

 

 

 

 

 

 

 

 

A Response to Senator John Gordner’s comments on School Property Tax Elimination (SB 76)

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:

http://www.dailyitem.com/news/tax-reformers-say-timing-is-finally-right/article_ce8c47b5-0fcc-56b4-86ae-f4c8e864c1e6.html

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.

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From the 2013 Independent Fiscal Office Report

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.

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Compare to the IFO graph above in relation to the Property Tax increase.

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)

Rant over!

For more on the plan to eliminate the School Property Tax in Pennsylvania visit www.ptcc.us

A County by County Analysis of Property Taxes in Pennsylvania

Introduction

The following Data was collected from http://www.tax-rates.org/.   Because this information is based on median income which varies from county to county and can vary even more within each county you could be paying far more than the averages presented here.  If you and your family fall below the median average, your personal data will reflect a higher percentage of your income going to pay the Property Tax.  It should also be noted that millage rates within each county can vary greatly as well.  A higher millage rate with  lower than median income levels will drastically change your personal statistics.

Using the data presented here the percentage of the property’s assessed fair market value varies from 1.02% to 2.22%

Ranking among Counties compared to the national median property tax ranges from 59th highest to 1744th highest of all the 3143 counties in the United States.  Of Pennsylvania’s 67 counties 43 counties fall in the highest 20% in the nation.

Percentage of yearly income varies from 5.52% of their yearly income to 1.99% of their yearly income.

Factoring in the millage rate variable demonstrates how much worse this data actually is for many families.  Taking Lebanon County as an example the median household income is $56,173 according to census data for the county.   The City of Lebanon, however, has a medium household income of $35,313 or $20,860 less than the county average.  Millage rates in the county range from 15.0134 to 24.7435.  The highest rates are applied to the city which has the lowest household income.  The data set from tax-rates.org  shows Lebanon county residents paying 1.27% of property’s assessed fair market value and yet everyone within the city limits is actually paying 2.47%, or almost double the county average even though their average household income is $20,860 less than the county average.  Those variables will greatly change the percentage of your individual yearly income that goes to pay the property tax.

The data set has been compiled to allow you to compare how your county compares to when it comes to property taxation.  Because it uses averages, it does not show the actual impact or the true regressive nature of the property tax.

As bad as this data set is, it’s actually much worse for many individuals and families.

To assess your individual rates within your county you will have to factor in your household income compared to the county average and then explore your county’s millage rates to see where you stand.

Remember as you read this data, your PIT, EIT and Sales Tax applies only to new earnings and new purchases.  The Property Tax is a tax you pay annually and will be applied to that property as long as it exists, not just on new value added to the home and property but on an assumed worth of the property annually.  In down markets, your Property Taxes are not adjusted to reflect declining home prices.

The Property Tax is based on a flawed system that an assumes worth of property through an even more flawed assessment system.  According to http://www.tax-rates.org statistics show that about 25% of homes in America are unfairly overassessed, and pay an average of $1,346 too much in property taxes every year.  County-wide reassessments demonstrate this to be true as appeals follow county-wide assessments where the overwhelming majorities of those appeals are successful.

Other factors come in to play here like the common-level ratio which, because it is also based on averages, makes the problem worse rather than uniformly applying the tax.  None of this is based on actual ability to pay but all framed around an assumed worth that often inaccurately reflects the actual worth of the home.

An average of 2/3 of the cost of local property taxation is the School Property Tax.  The majority of those cost drivers are through unfunded mandates coming down from the state level and out of the control of the local school district.    You may pay that tax at the local level but the reasons for the cost originates with the state.

County by County

(Listed Alphabetically)

Adams County: Adams County collects, on average, 1.07% of a property’s assessed fair market value as property tax.  Adams County is ranked 387th of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Adams County residents amounts to about 3.33% of their yearly income. Adams County is ranked 444th of the 3143 counties for property taxes as a percentage of median income.

Allegheny County:  Allegheny County collects, on average, 2.22% of a property’s assessed fair market value as property tax. Allegheny County is ranked 259th of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Allegheny County residents amounts to about 4.09% of their yearly income. Allegheny County is ranked 209th of the 3143 counties for property taxes as a percentage of median income.

Armstrong County:  Armstrong County collects, on average, 1.87% of a property’s assessed fair market value as property tax.  Armstrong County in the United States, and is ranked 657th of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Armstrong County residents amounts to about 3.35% of their yearly income. Armstrong County is ranked 434th of the 3143 counties for property taxes as a percentage of median income.

Beaver County:  Beaver County collects, on average, 1.7% of a property’s assessed fair market value as property tax.  Beaver County is ranked 503rd of the 3143 counties in order of median property taxes. The average yearly property tax paid by Beaver County residents amounts to about 3.49% of their yearly income. Beaver County is ranked 375th of the 3143 counties for property taxes as a percentage of median income.

Bedford County:  Bedford County collects, on average, 1.03% of a property’s assessed fair market value as property tax.  Bedford County is ranked 1223rd of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Bedford County residents amounts to about 2.56% of their yearly income. Bedford County is ranked 916th of the 3143 counties for property taxes as a percentage of median income.

Berks County:  Berks County collects, on average, 1.77% of a property’s assessed fair market value as property tax.  Berks County is ranked 154th of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Berks County residents amounts to about 4.66% of their yearly income. Berks County is ranked 112th of the 3143 counties for property taxes as a percentage of median income.

Blair County:  Blair County collects, on average, 1.05% of a property’s assessed fair market value as property tax.  Blair County is ranked 1445th of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Blair County residents amounts to about 1.99% of their yearly income. Blair County is ranked 1441st of the 3143 counties for property taxes as a percentage of median income.

Bradford County: Bradford County collects, on average, 1.45% of a property’s assessed fair market value as property tax.  Bradford County is ranked 817th of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Bradford County residents amounts to about 3.06% of their yearly income. Bradford County is ranked 565th of the 3143 counties for property taxes as a percentage of median income.

Bucks County:  Bucks County collects, on average, 1.27% of a property’s assessed fair market value as property tax.  Bucks County is ranked 63rd of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Bucks County residents amounts to about 4.68% of their yearly income. Bucks County is ranked 109th of the 3143 counties for property taxes as a percentage of median income.

Butler County:  Butler County collects, on average, 1.28% of a property’s assessed fair market value as property tax.  Butler County is ranked 432nd of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Butler County residents amounts to about 3.03% of their yearly income. Butler County is ranked 580th of the 3143 counties for property taxes as a percentage of median income.

Cambria County: Cambria County collects, on average, 1.34% of a property’s assessed fair market value as property tax.  Cambria County is ranked 1235th of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Cambria County residents amounts to about 2.4% of their yearly income. Cambria County is ranked 1048th of the 3143 counties for property taxes as a percentage of median income.

Cameron County: Cameron County collects, on average, 1.85% of a property’s assessed fair market value as property tax.  Cameron County is ranked 941st of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Cameron County residents amounts to about 3.07% of their yearly income. Cameron County is ranked 562nd of the 3143 counties for property taxes as a percentage of median income.

Carbon County:  Carbon County collects, on average, 1.56% of a property’s assessed fair market value as property tax.  Carbon County is ranked 372nd of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Carbon County residents amounts to about 4.02% of their yearly income. Carbon County is ranked 228th of the 3143 counties for property taxes as a percentage of median income.

Centre County:  Centre County collects, on average, 1.25% of a property’s assessed fair market value as property tax.  Centre County is ranked 368th of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Centre County residents amounts to about 3.34% of their yearly income. Centre County is ranked 438th of the 3143 counties for property taxes as a percentage of median income.

Chester County:  Chester County collects, on average, 1.25% of a property’s assessed fair market value as property tax.  Chester County is ranked 59th of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Chester County residents amounts to about 4.21% of their yearly income. Chester County is ranked 185th of the 3143 counties for property taxes as a percentage of median income.

Clarion County:  Clarion County collects, on average, 1.12% of a property’s assessed fair market value as property tax. Clarion County is 1333rd of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Clarion County residents amounts to about 2.2% of their yearly income. Clarion County is ranked 1252nd of the 3143 counties for property taxes as a percentage of median income.

Clearfield County:  Clearfield County collects, on average, 1.47% of a property’s assessed fair market value as property tax.  Clearfield County is ranked 1145th of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Clearfield County residents amounts to about 2.83% of their yearly income. Clearfield County is ranked 707th of the 3143 counties for property taxes as a percentage of median income.

Clinton County:  Clinton County collects, on average, 1.53% of a property’s assessed fair market value as property tax.  Clinton County is ranked 771st of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Clinton County residents amounts to about 3.21% of their yearly income. Clinton County is ranked 497th of the 3143 counties for property taxes as a percentage of median income.

Columbia County:  Columbia County collects, on average, 1.17% of a property’s assessed fair market value as property tax.  Columbia County is ranked 920th of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Columbia County residents amounts to about 2.72% of their yearly income. Columbia County is ranked 776th of the 3143 counties for property taxes as a percentage of median income.

Crawford County: Erie County collects, on average, 1.83% of a property’s assessed fair market value as property tax.  Erie is ranked 693rd of the 3143 counties in order of median property taxes.  Crawford County collects, on average, 1.65% of a property’s assessed fair market value as property tax.  The average yearly property tax paid by Crawford County residents amounts to about 3.46% of their yearly income. Crawford County is ranked 392nd of the 3143 counties for property taxes as a percentage of median income.

Cumberland County:  Cumberland County collects, on average, 1.14% of a property’s assessed fair market value as property tax.  Cumberland County is ranked 455th of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Cumberland County residents amounts to about 2.8% of their yearly income. Cumberland County is ranked 724th of the 3143 counties for property taxes as a percentage of median income.

Dauphin County:  Dauphin County collects, on average, 1.54% of a property’s assessed fair market value as property tax.  Dauphin County is ranked 309th of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Dauphin County residents amounts to about 3.48% of their yearly income. Dauphin County is ranked 382nd of the 3143 counties for property taxes as a percentage of median income.

Delaware County: Delaware County collects, on average, 1.67% of a property’s assessed fair market value as property tax.  Delaware County is ranked 73rd of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Delaware County residents amounts to about 5.04% of their yearly income. Delaware County is ranked 73rd of the 3143 counties for property taxes as a percentage of median income.

Elk County:  Elk County collects, on average, 1.55% of a property’s assessed fair market value as property tax.  Elk County is ranked 886th of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Elk County residents amounts to about 2.89% of their yearly income. Elk County is ranked 668th of the 3143 counties for property taxes as a percentage of median income.

Erie County: The average yearly property tax paid by Erie County residents amounts to about 3.64% of their yearly income.  Erie is ranked 430th of the 3143 counties in order of median property taxes.   Erie County is ranked 335th of the 3143 counties for property taxes as a percentage of median income.

Fayette County:  Fayette County collects, on average, 1.3% of a property’s assessed fair market value as property tax.  Fayette County is ranked 1376th of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Fayette County residents amounts to about 2.49% of their yearly income. Fayette County is ranked 973rd of the 3143 counties for property taxes as a percentage of median income.

Forest County: Forest County collects, on average, 1.08% of a property’s assessed fair market value as property tax.  Forest County is ranked 1744th of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Forest County residents amounts to about 2.38% of their yearly income. Forest County is ranked 1076th of the 3143 counties for property taxes as a percentage of median income.

Franklin County:  Franklin County collects, on average, 0.99% of a property’s assessed fair market value as property tax.  Franklin County is ranked 613th of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Franklin County residents amounts to about 2.94% of their yearly income. Franklin County is ranked 631st of the 3143 counties for property taxes as a percentage of median income.

Fulton County:  Fulton County collects, on average, 1.03% of a property’s assessed fair market value as property tax.  Fulton County is ranked 685th of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Fulton County residents amounts to about 3.17% of their yearly income. Fulton County is ranked 515th of the 3143 counties for property taxes as a percentage of median income.

Greene County:  Greene County collects, on average, 1.69% of a property’s assessed fair market value as property tax.  Greene County is ranked 930th of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Greene County residents amounts to about 2.77% of their yearly income. Greene County is ranked 746th of the 3143 counties for property taxes as a percentage of median income.

Huntingdon County:  Huntingdon County collects, on average, 1.02% of a property’s assessed fair market value as property tax.  Huntington County is ranked 1374th of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Huntingdon County residents amounts to about 2.25% of their yearly income. Huntingdon County is ranked 1206th of the 3143 counties for property taxes as a percentage of median income.

Indiana County: Indiana County collects, on average, 1.51% of a property’s assessed fair market value as property tax. Indiana County is ranked 796th of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Indiana County residents amounts to about 3% of their yearly income. Indiana County is ranked 596th of the 3143 counties for property taxes as a percentage of median income.

Jefferson County: Jefferson County collects, on average, 1.39% of a property’s assessed fair market value as property tax.  Jefferson is ranked 1307th of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Jefferson County residents amounts to about 2.52% of their yearly income. Jefferson County is ranked 949th of the 3143 counties for property taxes as a percentage of median income.

Juniata County: Juniata County collects, on average, 1.11% of a property’s assessed fair market value as property tax.  Juniata County is ranked 874th of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Juniata County residents amounts to about 2.78% of their yearly income. Juniata County is ranked 739th of the 3143 counties for property taxes as a percentage of median income.

Lackawanna County:  Lackawanna County collects, on average, 1.43% of a property’s assessed fair market value as property tax.  Lackawanna County is ranked 477th of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Lackawanna County residents amounts to about 3.4% of their yearly income. Lackawanna County is ranked 413th of the 3143 counties for property taxes as a percentage of median income.

Lancaster County: Lancaster County collects, on average, 1.43% of a property’s assessed fair market value as property tax. Lancaster County is ranked 244th of the 3143 counties in order of median property taxes. The average yearly property tax paid by Lancaster County residents amounts to about 4.01% of their yearly income. Lancaster County is ranked 231st of the 3143 counties for property taxes as a percentage of median income.

Lawrence County: Lawrence County collects, on average, 1.55% of a property’s assessed fair market value as property tax. Lawrence County is ranked 846th of the 3143 counties in the United States, in order of the median amount of property taxes collected. The average yearly property tax paid by Lawrence County residents amounts to about 2.94% of their yearly income. Lawrence County is ranked 636th of the 3143 counties for property taxes as a percentage of median income.

Lebanon County: Lebanon County collects, on average, 1.27% of a property’s assessed fair market value as property tax. Lebanon County is ranked 465th of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Lebanon County residents amounts to about 3.2% of their yearly income. Lebanon County is ranked 501st of the 3143 counties for property taxes as a percentage of median income.

Lehigh County:  Lehigh County collects, on average, 1.48% of a property’s assessed fair market value as property tax.  Lehigh County is ranked 157th of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Lehigh County residents amounts to about 4.39% of their yearly income. Lehigh County is ranked 149th of the 3143 counties for property taxes as a percentage of median income.

Luzerne County:  Luzerne County collects, on average, 1.4% of a property’s assessed fair market value as property tax. Luzerne County is ranked 705th of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Luzerne County residents amounts to about 3.02% of their yearly income. Luzerne County is ranked 586th of the 3143 counties for property taxes as a percentage of median income.

Lycoming County:  Lycoming County collects, on average, 1.53% of a property’s assessed fair market value as property tax.  Lycoming County is ranked 552nd of the 3143 counties in order of median property taxes. The average yearly property tax paid by Lycoming County residents amounts to about 3.53% of their yearly income. Lycoming County is ranked 364th of the 3143 counties for property taxes as a percentage of median income.

McKean County:  McKean County collects, on average, 1.71% of a property’s assessed fair market value as property tax.  McKean County is ranked 1120th of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by McKean County residents amounts to about 2.6% of their yearly income. McKean County is ranked 874th of the 3143 counties for property taxes as a percentage of median income.

Mercer County: Mercer County collects, on average, 1.47% of a property’s assessed fair market value as property tax.  Mercer is ranked 787th of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Mercer County residents amounts to about 2.88% of their yearly income. Mercer County is ranked 672nd of the 3143 counties for property taxes as a percentage of median income.

Mifflin County:  Mifflin County collects, on average, 1.55% of a property’s assessed fair market value as property tax.  Mifflin County is ranked 842nd of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Mifflin County residents amounts to about 3.27% of their yearly income. Mifflin County is ranked 459th of the 3143 counties for property taxes as a percentage of median income.

Monroe County:  Monroe County collects, on average, 1.67% of a property’s assessed fair market value as property tax.  Monroe County is ranked 115th of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Monroe County residents amounts to about 5.52% of their yearly income. Monroe County is ranked 53rd of the 3143 counties for property taxes as a percentage of median income.

Montgomery County:  Montgomery County collects, on average, 1.29% of a property’s assessed fair market value as property tax.  Montgomery County is ranked 76th of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Montgomery County residents amounts to about 4.17% of their yearly income. Montgomery County is ranked 197th of the 3143 counties for property taxes as a percentage of median income.

Montour County: Montour County collects, on average, 1.04% of a property’s assessed fair market value as property tax.  Montour County is ranked 778th of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Montour County residents amounts to about 2.86% of their yearly income. Montour County is ranked 689th of the 3143 counties for property taxes as a percentage of median income.

Northampton County: Northampton County collects, on average, 1.5% of a property’s assessed fair market value as property tax.  Northampton County is ranked 129th of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Northampton County residents amounts to about 4.75% of their yearly income. Northampton County is ranked 100th of the 3143 counties for property taxes as a percentage of median income.

Northumberland County:  Northumberland County collects, on average, 1.13% of a property’s assessed fair market value as property tax.  Northumberland County is ranked 1401st of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Northumberland County residents amounts to about 2.23% of their yearly income. Northumberland County is ranked 1219th of the 3143 counties for property taxes as a percentage of median income.

Perry County:  Perry County collects, on average, 1.27% of a property’s assessed fair market value as property tax.  Perry County is ranked 550th of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Perry County residents amounts to about 3.11% of their yearly income. Perry County is ranked 538th of the 3143 counties for property taxes as a percentage of median income.

Philadelphia County:  Philadelphia County collects, on average, 0.91% of a property’s assessed fair market value as property tax.  Philadelphia County is ranked 1120th of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Philadelphia County residents amounts to about 2.57% of their yearly income. Philadelphia County is ranked 900th of the 3143 counties for property taxes as a percentage of median income.

Pike County:  Pike County collects, on average, 1.34% of a property’s assessed fair market value as property tax.  Pike County is ranked 173rd of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Pike County residents amounts to about 4.65% of their yearly income. Pike County is ranked 116th of the 3143 counties for property taxes as a percentage of median income.

Potter County:  Potter County collects, on average, 1.48% of a property’s assessed fair market value as property tax.  Potter County is ranked 990th of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Potter County residents amounts to about 2.95% of their yearly income. Potter County is ranked 624th of the 3143 counties for property taxes as a percentage of median income.

Schuylkill County:  Schuylkill County collects, on average, 1.57% of a property’s assessed fair market value as property tax. Schuylkill County is ranked 923rd of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Schuylkill County residents amounts to about 2.84% of their yearly income. Schuylkill County is ranked 700th of the 3143 counties for property taxes as a percentage of median income.

Snyder County:  Snyder County collects, on average, 1.17% of a property’s assessed fair market value as property tax.  Snyder County is ranked 842nd of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Snyder County residents amounts to about 2.79% of their yearly income. Snyder County is ranked 728th of the 3143 counties for property taxes as a percentage of median income.

Somerset County:  Somerset County collects, on average, 1.15% of a property’s assessed fair market value as property tax.  Somerset County is ranked 1392nd of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Somerset County residents amounts to about 2.35% of their yearly income. Somerset County is ranked 1104th of the 3143 counties for property taxes as a percentage of median income.

Sullivan County:  Sullivan County collects, on average, 1.05% of a property’s assessed fair market value as property tax.  Sullivan County is ranked 1075th of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Sullivan County residents amounts to about 3.1% of their yearly income. Sullivan County is ranked 549th of the 3143 counties for property taxes as a percentage of median income.

Susquehanna County:  Susquehanna County collects, on average, 1.44% of a property’s assessed fair market value as property tax.  Susquehanna County is ranked 572nd of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Susquehanna County residents amounts to about 3.66% of their yearly income. Susquehanna County is ranked 331st of the 3143 counties for property taxes as a percentage of median income.

Tioga County:  Tioga County collects, on average, 1.52% of a property’s assessed fair market value as property tax.  Tioga County is ranked 695th of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Tioga County residents amounts to about 3.44% of their yearly income. Tioga County is ranked 401st of the 3143 counties for property taxes as a percentage of median income.

Union County:  Union County collects, on average, 1.22% of a property’s assessed fair market value as property tax.  Union County is ranked 608th of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Union County residents amounts to about 3.25% of their yearly income. Union County is ranked 476th of the 3143 counties for property taxes as a percentage of median income.

Venango County:  Venango County collects, on average, 1.67% of a property’s assessed fair market value as property tax. Venango County is ranked 1052nd of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Venango County residents amounts to about 2.76% of their yearly income. Venango County is ranked 753rd of the 3143 counties for property taxes as a percentage of median income.

Warren County: Warren County collects, on average, 1.69% of a property’s assessed fair market value as property tax. Warren County is ranked 878th of the 3143 counties in the United States, in order of the median amount of property taxes collected.  The average yearly property tax paid by Warren County residents amounts to about 2.92% of their yearly income. Warren County is ranked 652nd of the 3143 counties for property taxes as a percentage of median income.

Washington County: Washington County collects, on average, 1.18% of a property’s assessed fair market value as property tax.  Washington County is ranked 749th of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Washington County residents amounts to about 2.54% of their yearly income. Washington County is ranked 928th of the 3143 counties for property taxes as a percentage of median income.

Wayne County:  Wayne County collects, on average, 1.11% of a property’s assessed fair market value as property tax.  Wayne County is ranked 491st of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Wayne County residents amounts to about 3.78% of their yearly income. Wayne County is ranked 287th of the 3143 counties for property taxes as a percentage of median income.

Westmoreland County:  Westmoreland County collects, on average, 1.49% of a property’s assessed fair market value as property tax.  Westmoreland County 520th of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Westmoreland County residents amounts to about 3.31% of their yearly income. Westmoreland County is ranked 451st of the 3143 counties for property taxes as a percentage of median income.

Wyoming County:  Wyoming County collects, on average, 1.46% of a property’s assessed fair market value as property tax.  Wyoming County is ranked 422nd of the 3143 counties in order of median property taxes.  The average yearly property tax paid by Wyoming County residents amounts to about 3.73% of their yearly income. Wyoming County is ranked 304th of the 3143 counties for property taxes as a percentage of median income.

York County:  York County collects, on average, 1.52% of a property’s assessed fair market value as property tax.  York County is ranked 234th of the 3143 counties in order of median property taxes.  The average yearly property tax paid by York County residents amounts to about 4.01% of their yearly income. York County is ranked 232nd of the 3143 counties for property taxes as a percentage of median income.

 

HB/SB 76: Helping Undo Decades of Tax Shifting Policy!

Since the introduction of HB/SB 76 our bill has been criticized for being a tax shift.  Replacing the funding currently received from the property tax has to come from somewhere.  You do not simply get 13 billion dollars out of thin air.  It will require a well-planned replacement revenue system.  Our opponents call this a tax shift and in their telling they leave out a very important aspect of the story.

So let’s address this notion of a tax shift.  In the process let’s do so by looking at the results of decades of tax shifting policies that exist as a result of the property tax.  This is the part of the equation of “Tax-Shift” claiming opponents choose to ignore!

As we look at the current property tax situation the burden of funding education is a tax shift.  It shifts responsibility and accountability to some while providing for loopholes, reductions and exemptions for others. Because it is based on assumed worth and not on actual ability to pay this can have a negative impact as we see in the 10,000 people a year losing their homes as a result of the tax.  That number does not include home foreclosures and bankruptcy as a result of the inability to pay the property tax.

In that sense HB/SB 76 is taking a tax that is intended to fund education and making it the responsibility of everyone not just the responsibility of those hand-picked by government to pay the lion’s share.  Remember that every home-owner who is paying property taxes is also paying Personal Income Tax and Sales Tax that is also used to fund education.The property owners contribution to education funding then becomes even greater.

In doing so, what we are accomplishing is the undoing of decades of tax shift policies that exist, in large part, because their is a property tax.

We know that the current shifting of taxes is making it harder for many homeowners to stay in their homes.  Seniors on a limited income face the potential of losing their homes and going into assisted care facilities.  The cost of living in these assisted care facilities is much greater than if that senior had been allowed to stay in their own home which, in many cases, is completely paid for.   While they may be perfectly able to stay in their home and maintain that home, a tax has forced them to make a decision that will add to the tax burden of others.  That is a forced decision that results in a tax shift that can be undone by HB/SB 76.

We also know that rent is rising at the same rate and, in some cases, higher than the rate of property tax increases.  The direct connection between increasing rent and property taxes simply can’t be ignored.  The increase of that rent for low-income families creates a need for special subsidized housing programs, Section 8 housing as well as adding to need for other forms of public assistance (programs like SNAP).  Once again we see a  forced decision in a tax that forces more people to become reliant on government programs that must be paid for by others.  That is a tax shift as a result of property taxes.

Why would rent increase at a faster rate than the direct impact of increases associated to property?

The answer to that is simply because the rising property tax impacts the costs of the goods and services we all use. The landlord must keep up with the property tax or the renters will have no place to live.  Because of the cascade effect of property taxes, the cost to the landlord in maintaining those properties also increased.  The hardware, carpet, lumber and appliance stores all pay property taxes that impact the cost of the goods and services that are needed to maintain their properties.  That higher cost is going to be reflected in the rent.  That is another forced tax shift as the result of property taxes that results in higher rent.

This also applies to homeowners.  If the home-owners finds themselves in a position of choosing between paying the property tax and doing necessary maintenance of their homes, the property tax wins out.  It makes no sense in adding to the cost of the home in maintaining it if you know that the government is eventually going to step in and take that home from you.  This adds to the problem of blighted neighborhoods but that’s okay because the government has more tax shifting programs ready to provide revenue to communities to deal with blighted properties.  It’s just another tax shift that again is a forced decision regulated by a tax, not by ability to pay.

It should be added here that home-owners may simply choose to avoid making upgrades on maintaining their property because they fear higher taxes as a result.  In many areas of the state school districts do spot assessments that target homes that made improvement on their property.  Even though that improvement has nothing to do with the cost of education or the home-owner may have scrimped to save for a long period of time to put the money together to make that improvement, this all becomes irrelevant.  It is simply assumed that a higher burden of taxation can be levied on that home-owner because they could afford to make an improvement on their property.  That is a tax shifting policy.

It exposes something related to the problems associated with homes and assumed worth. If that same homeowner decides to use that money to go on a vacation or spend in other areas not related to the improvement of their homes they have no risk of higher property taxes but because they improved their homes, making their neighborhoods a more attractive place to live, they face higher taxes.

Because of the high cost of the property tax many young families can’t make that step to home-ownership and become forced into living in rental properties.  Where they might be able to meet the obligations of a mortgage, the property tax keeps them from being able to make that purchase.  As a result they find themselves paying rent in a home that is more expensive than a mortgage on a similar property.  The reason the rent is higher is due, in part, because of the property tax. That is a tax shift as a result of the property taxes.

As taxes increases many renters find themselves unable to keep up with the higher rent which forces them to make a decision to relocate.  This creates an instability in the classroom that adds to the cost of education.  That additional cost translates into a need for yet another tax shift that could be stabilized if those families were allowed to remain in their homes.  For many of these low-income families it also means finding a smaller place to live or to consider partnering with other families in their rented homes leading to overcrowding and more instability in their home life.  The  number of ways this impacts the cost of education is a story for another blog posting.

One of the tools government uses to attract new businesses into an area of the state is through KOZs (Keystone Opportunity Zone) and LERTAs (Local Economic Revitalization Tax Assistance).  While these programs attract businesses and help with jobs, the programs also shift the responsibility of paying the property tax to others.  We are told that this is an investment in the future of our community, albeit one leveraged by government and not free-market principles.  In many cases, once the tax abatement period has ended those businesses often move elsewhere.  The investment made by taxpayers is lost and so are the jobs in that community.  That impacts local earned income tax revenue.  The end result is yet another tax shift as a result of the property taxes.

In the shifting of those taxes, the new business operating under KOZ and LERTA programs has an economic advantage over established business that have been contributing to the economy of the local community.  For smaller established businesses it can have the impact of hurting their business enough that they can no longer afford to stay in business.   All this happens because of the need to use a tax shifting government program to attract new business that would not be necessary if the property tax were eliminated for everyone.

As was discussed in another blog posting.  The property tax has a cascade effect that impacts the price of everything we purchase.  All the goods we use are made in a production facility that pays the property tax.  That includes our food and clothing.  At every stage of that production in different facilities, the property tax is applied adding to the total cost of the products we use.  Again we are shifting those costs to the consumer and that represents yet another tax shift.

As farmers find themselves on land needed to grow crops and raise livestock they also see property taxes soaring.  As a result the government has enacted clean and green programs to lower the cost of the property tax on that land.  While these programs are necessary to keep the farmer on their farm, they are only necessary because of the property tax.  That reduction in their taxes creates a shortfall in the revenue collected and has to be made up by taxing others.  The burden is shifted to others in yet one more tax shift.

In every case these additional expenses on the cost of living for the average working family is because we have a corporate and governmental system that insists on protecting the status quo of the property tax.  In every case everything we purchase becomes more expensive because of the way the property tax works.  It creates more need of more government programs in subsidizing others adding to the cost of government resulting in the need for more taxes.

HB/SB 76 would put an end to all of these additional costs as a result of the rising school property tax.  It would kill the continual need for tax shifting because they refuse to accept the reality of the property tax in its impact in the lives of working families.

It becomes even more egregious because property tax is based on an estimated (and therefore inaccurate) worth associated to a home and not on the individual’s ability to pay.  That is the reason behind the need for the government programs that offset the burden of the property tax.   We are told that constant reassessments are needed to keep the property tax fair and yet in every county-wide reassessment, which carries costs in the millions, the appeals process begins continually demonstrating the inability of an assessment to accurately estimate the value of property.  The additional cost to property owners of these reassessments is only necessary because we have a property tax.  It’s another tax shift passed on to property owners to pay to ineffectually make the property tax fair.

If the assessed value of your property is more than you can sell your home for, you are paying property taxes on property you don’t actually own.  Those who seek to protect the status quo are perfectly fine with this.  Those who seek to protect the status quo are perfectly fine with the myriad of tax shifts that occur because there is a property tax.  And yet those same people tell us they will not support HB/SB 76 because it represents a tax shift.

HB/SB 76 is based on ability to pay.  HB/SB 76 understands that funding education is important and it should be the responsibility of everyone, not just shifting the burden on to some.  HB/SB 76 would turn the whole state into a permanent KOZ attracting new businesses without the need of government incentive.  Not only that but those businesses would remain in place creating more economic stability.  HB/SB 76 would eliminate the need for higher and higher rent as a result of higher and higher property taxes.  Rather than growing to need for more rent subsidies and programs we could shrink that base while, at the same time, making home ownership to these families more affordable.

HB/SB 76 would create homeowners who establish roots in their communities.  Those roots are essential in maintaining economic stability in a community as well as reducing the cost of education as a result of the problems related to transient rental populations in our schools.

You see, in the end it is the existing system that is the tax shift.  In the end, the other government programs created to try and put band-aids on the problem rather than actually fix the problem just generates more tax shifting.  HB/SB 76 is an attempt to put an end to much of this.  It is the correction of a system built on tax shifting policies to create stability and projectable income in budgeting for the future.

Yes, we need to go to a more stable revenue stream for the tax payer.  In that sense it is a tax shift.  In reality though, HBSB 76 undoes decades of tax shifting policies.  It corrects it. Using the “Tax Shift” excuse is just that, an excuse because it chooses to ignore the perpetuation of tax shifting that takes places under the current unsustainable system of education funding.

That’s what they want you to ignore.  It’s the part of the tax shifting rhetoric they are unwilling to address.

HB/SB 76, as confirmed by the Independent Fiscal Office, is revenue neutral unlike the the decades of of tax shifting policies that exist as a result of property taxes.  As a revenue neutral bill it is not a tax increase unlike the many programs that exist because of the property tax that actually do increase taxes and add to the cost of living.

By correcting the decades of tax-shifting policies we can see lower costs for all of us in the long run.  Or we can continue down this path of creating more need for more government programs which creates more need for more government revenue which means higher taxes for all of us.  That is the option the status quo is protecting!

 

The Cascade Effect Of Property Taxes

Adding Insult to Injury:  The Cascade Effect of the Property Tax

Most of us would consider it abhorrent to tax the basic essentials of life. Nutritional food is one of those essentials.  Imagine if the legislators decided that, in order to raise revenue, they would put a tax on a loaf of bread. Would there be an outcry about the impact of such a tax especially concerning the poor?

And yet, through the property tax, that loaf of bread is taxed:  not just taxed once but many times over. We tax the land of the farmer who grows the wheat to make the bread. We tax the land of the baker who bakes the bread. We tax the retailer who sells the bread.  We also tax the land of the shipping company that moves the bread from place to place. Each of these steps adds levels of taxation that drives up the cost of that loaf of bread. Let’s not forget the property tax on the company that makes the wrapper for the bread  or the property tax on the company that makes the twist ties to seal in the freshness of that bread.  Every producer in the process has their land taxed and that tax drives up the cost of the final product

It isn’t just the bread we purchase.

You might be thinking about starting a home garden.  The plants you buy at the home garden center at your local Lowe’s or Home Depot are impacted by the property taxes on those retail centers.  They didn’t grow those plants. They purchased them from another  facility that had their property taxed. Then those goods were shipped and the shipping company is paying a property tax.

Everything we purchase from our food to our newspapers to our computers to our television sets is all impacted by the property tax; it all has cascading levels of hidden property taxation driving up the costs.

It doesn’t stop with physical goods we purchase.  It also impacts every service we use: the lawyer, the accountant, the hair stylist, the waste management companies, the plumber, the auto mechanic, the doctor’s office, even the convenience store when you get your gas to drive to and from work…they are all hit with property taxes and those property taxes add to the cost of providing those services and products to us.

Let’s not forget the cost of rent.  One of the prime driving factors behind the higher rent is the ever-increasing property taxes.  Even though you may not actually see a property tax in your rent, it’s there.  You are paying the property tax through higher rents. It would be easy to blame the “greedy landlord” but if you want to stay in your rented home that’s not going to happen if the landlord doesn’t make adjustments to the rent that reflect the increases in the property tax.  If the landlord doesn’t make adjustments, the landlord will lose money on those properties and eventually the property will change hands.  If the landlord doesn’t pay the property taxes the property will be seized and you won’t have your rented home anymore.

Are you thinking about remodeling your home?  Maybe you want to add a shed to your backyard.  You’ll pay a little extra for everything you purchase because those items have been taxed through the land of the businesses that produced them and the land for the store that sold them to you.  Adding insult to injury, after you finish you face the distinct possibility of seeing your assessed value increase so you can pay more property taxes on top of the hidden property taxes you paid when you made your upgrading purchases.

That’s because property tax is the tax that just keeps taking.

Few ever refer to the property tax as a “Cascade Tax” but it does have the same effect with one important difference.

Under a cascade tax a percentage is levied based on the actual value of the product being produced.  The property tax is an arbitrarily assumed value assessed on the entire property that impacts everything that company does.  And yes, it even results in the property tax being passed through to the consumer on things that normally aren’t taxed.

As recent county-wide reassessments have revealed, using the assessed value of a property to determine the worth or the property is a seriously flawed system.  The reassessments result in countless appeals.  The majority of those appeals are approved clearly demonstrating that the original assessed value was an incorrect assumption of the property worth.  In cases where the assumed assessed value is higher than the actual worth (market value) of the property this can result in over-inflated taxes which will result in artificially and over-inflated costs for goods and services.

This is a part of the property tax we usually ignore.  We complain about higher costs, higher service fees, higher rent but often our anger is misdirected.

This cascading effect of the property tax impacts the cost of everything we purchase, goods and services alike,  but it’s all hidden from us. It is a tax that we, the consumer, must pay even though we don’t actually see it tabulated into the cost of the product or service.  The cascade effect only adds to the already egregiously regressive nature of the property tax.  That is exactly the way a cascade tax works.

This cascading effect is entirely outside of your control when it impacts the essential things for you and your family’s survival.  Whether you are visiting your family doctor, filling prescriptions at the local pharmacy, making healthy food choices for your family on providing them with clothing, shelter and essential needs: the property tax will find you.

The largest portion of this property tax is seen through the school property tax to fund education.  We believe there’s a better way.

While looking at a property tax elimination proposal (HB/SB 76) the Independent Fiscal Office did a study that demonstrated since 1994 the property tax has increased 146% as of 2013.  In contrast, the Pennsylvania average weekly wage (AWW) has increased by only 80% – just a bit more than half the increase in the school property tax since 1994.

With the property tax almost doubling the increase of wages and those property taxes impacting everything you purchase and every service you use your wages will buy less of those goods and services than they did before.

In 1994 a Big Mac at McDonald’s sold for $2.30.  In 2013 that same Big Mac would cost you about $4.00.  While the local property tax might not be the only reason for the increase, you can’t ignore that increased property taxation plays a part.

Less buying power for the consumer impacts job creation.  The less demand there is for goods and services will translate into fewer people necessary to supply those goods and services.

Now imagine eliminating the property tax by replacing the revenue with an increase in the PIT tax and an increase and expansion of the Sales tax. Remember that you only pay the PIT tax once on new income. You also only pay a sales tax once at the time of purchase.

The savings to the consumer would not just be through the money saved by the elimination of the property tax; it translates into savings on the goods and services we use. It gives the consumer more buying power which translates into an ability to make more purchases.  That creates more jobs which creates even more disposable income.

Opponents to HB/SB76 often cite the impact on lower income families as a reason for their opposition.  The Independent Fiscal Office disagrees saying that:

  •  The elimination of school property taxes increases the disposable income of property taxpayers.
  • The analysis indicates that HB/SB 76 will cause home values to increase, on average, by more than 10% statewide.
  • 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.
  • 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.
  • Benefits would also accrue to home builders, home developers, and other land owners who convert current land holdings into new housing.
  • 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.

That’s just factoring the direct benefit to working families through the elimination of school property taxes.  When you look at the additional costs to all of the goods and services because of the cascading effect of the property tax, the average Pennsylvanian will see even more savings.

By giving the consumer more buying power we are giving the consumer a raise in their income without artificially adjusting it through the interference of mandatory government wage increases. Instead of adding layers of taxation which artificially drives up the cost of everything, we get government out of the way, we still provide funding for our schools and we make living in Pennsylvania a better option for everyone.