The Property Tax

I would like to start my posts with an issue near to my heart: public schools, specifically the proposed elimination of Pennsylvania property tax, the primary source of funding for public schools. Pennsylvania has had a property tax since the founding of the Commonwealth after the Revolutionary War. As noted by the Pennsylvania School Board Association’s director of Research Services, Dave Davare, the property tax was first tied to schooling in 1835 and has been the primary source of school funding since then. Because property taxes are collected by local municipalities and not the state, school funding is locally controlled, not under the auspices of Harrisburg. In 2017, Pennsylvania voters approved a referendum on substantially modifying or eliminating the property tax. Unmentioned in the referendum was the issue that as schools still required funding, other revenue sources would have to be found.

The most prominent proposal for funding schools in lieu of property taxes comes from State Sen. David Argall (R. Schuylkill). As reported by York Daily Record (a subsidiary of USA Today) reporter Ed Mahon, the 2017 iteration of the legislation–Senate Bill 76–included raising personal income tax and sales tax while expanding the sales tax to cover daycare, diapers, clothing, and additional foodstuffs. The Republican nominee for governor, Scott Wagner, supports the bill (Mahon).

David_Argall
State Senator David Argall (R. Schuylkill)

Both Senate Bill 76 and the wider push to repeal the property tax are misguided.

The taxes that S.B. 76 levies disproportionately affect poorer populations. Taxing consumer goods such as clothing, diapers, and foodstuffs has a greater effect on working-class households and retirees for whom expenditures on necessities comprise a high portion of income. Therefore, while wealthy and working-class families of four probably need around the same number of diapers, the cost of the diapers is less significant to the wealthy family. Similarly, Mahon notes that daycare costs for a four-year-old and an infant amount to around $21,000 per year. If daycare became taxed, families would be paying an additional $1,500 each year. Further, an employed individual and a retired one will both need food, but the employed one will be able to afford rising food costs more easily than the retiree.

Moreover, repealing the property tax will aid wealthier individuals who own property with high real estate values more than blue-collar workers whose wealth is not concentrated in land. In urban areas where working families rent apartments, a property tax repeal would bring no financial relief whatsoever while its replacements (sales tax and income tax) would result in higher taxes. While the income tax increase would affect wealthier families more than retirees or people with low incomes, the other changes in taxation definitively favor wealthier families. Thus, Senate Bill 76 is not a good solution for most residents of Pennsylvania.

However, more broadly, the entire repeal effort is dangerous for the future of Pennsylvania’s public schools. Essentially, the proposal takes money out of the hands of local communities and entrusts it to Harrisburg. Instead of municipalities collecting property taxes, the state would collect taxes and dispense the revenue to the schools as it sees fit. While in principle, the idea may not sound catastrophic, both history and current Pennsylvania politics suggest otherwise.

From a historical perspective, over the last 45 years, state funding for public schools has steadily decreased, leaving municipalities to bear a larger and larger share of the costs (Davare). Cutting the primary source of funding for municipalities to pay for schools would entail trusting the state to abandon a 45-year trend and instead keep school funding at a constant level.

The state’s commitment to funding public schools appears more tenuous when the current financial status of the state is taken into account. As reported by Dennis Owens of abc27 News, since 2001 Pennsylvania has been under-funding its pension system based on faulty estimates of investment growth. Reporter Jan Murphy of Penn Live relays that as of 2017, estimated pension debt was over $70 billion. By comparison, Governor Wolf’s proposed 2018-2019 budget included $32 billion in total expenses (PA Office of the Budget). Eventually, Pennsylvania lawmakers are going to have to find funding to cover the debt.

7A7F5730261B4F4A85196F2A4E3A531D_36894266_ver1.0_1280_720.jpg
                                An estimated pension debt counter installed in the PA Capital                                    Photo Credit: abc27 News 

 

Given their history, there is no reason to believe that lawmakers would not cut at least some school funding to pay off the their debt. In other words, schools would be made to pay for a problem they did not create. Districts that have responsibly managed money for decades would lose funding because Harrisburg lawmakers haven’t. Such reallocation of funds would be unjust, and it would also result in lower-quality education as districts were starved of their resources.

As a public high school student, I appreciate firsthand the benefits of a quality education. The public schooling system is how America builds its future. Students should not suffer because lawmakers they could not vote for have left the pension problem to fester for nearly two decades. Further, working-class families and retirees should not see tax hikes to compensate for cuts for wealthier families. All of this is not to say that the property tax system is perfect, because it isn’t. Bad appraisals, varying enforcement, and frequent complaints have been present as long as the tax has been levied, and improvements are necessary. However, elimination of the property tax would burden working families and sacrifice local control of education to state control.

On my behalf, and on the behalf of all future proud Pennsylvanians, tell your lawmakers to trust local governments to run their own schools and fund them as they see fit.

 

Works Cited

Davare, David W. “Rising costs . . . falling funding.” PSBA Bulletin, Feb. 2008, pp. 18-22. Quakertown Community School District, https://www.qcsd.org/cms/lib04/PA01000005/Centricity/Domain/1/rising_costs.pdf. Accessed 7 June 2018.

Mahon, Ed. “What’s worse than paying Pa.’s property taxes? For some: not having to pay them.” York Daily Record, 13 Apr. 2018, https://www.ydr.com/story/news/2018/04/13/eliminating-pa-property-taxes-sounds-great-but-heres-what-gop-ad-dont-tell-you-you-could-pay/506289002/. Accessed 6 June 2018.

Murphy, Jan. “Pa.’s pension debt still massive just not as high as the ‘unofficial’ pension clock reflected.” Penn Live, 1 May 2017, http://www.pennlive.com/politics/index.ssf/2017/05/pas_pension_debt_still_massive.html. Accessed 6 June 2018.

Owens, Dennis. “Pennsylvania’s pension debt continues to mount; critics alarmed.” abc27 News, 7 Apr. 2016, http://www.abc27.com/news/pennsylvanias-pension-debt-continues-to-mount-critics-alarmed/1108224783. Accessed 6 June 2018.

“2018-19 Governor’s Executive Budget.” Pennsylvania Office of the Budget, http://www.budget.pa.gov/PublicationsAndReports/CommonwealthBudget/Documents/2018-19%20Proposed%20Budget/2018-19%20Governor%27s%20Executive%20Budget%20-%20Web.pdf. Accessed 7 June 2018.

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5 thoughts on “The Property Tax

  1. Susan Warner-Mills June 12, 2018 / 2:26 pm

    Excellent summary, analysis and argument on a critical, but sadly under-reported issue facing all residents of Pennsylvania. THANK YOU!

  2. Nick Jacobson June 9, 2018 / 4:45 pm

    I posted the first one anonymously because I was curious about the reaction to it. I have changed my username and should no longer be anonymous.

    As for the inequalities of local tax bases for public ed, I think that is one of the greatest weaknesses of property taxes funding schools–that is, places with higher property values end up with better-funded education systems. It is a problem that itself deserves an entire blog post. While I haven’t done too much research in the area, my instinct would be to say that higher governments (be them state or federal) could provide additional funding to under-funded schools based on the argument that having an educated populace reduces government expenditures on health care, unemployment, child care, affordable housing, and a variety of other things (for more information about the benefits of education, I recommend the World Bank Group–link posted below). As public education in an area improved, so might property values, increasing property taxes and school revenue. Thus, subsidizing education while morally integral could also be economically beneficial. Given a legislature that shows more interest in supporting public education, perhaps some sort of centralized distribution could be possible, but it could only sustain itself as long as every subsequent administration supported it, which is too unlikely a prospect for my tastes.

    https://www.globalpartnership.org/education/the-benefits-of-education

  3. Margaret Marr June 9, 2018 / 3:34 pm

    Strong arguments. Kudos. Glad to see young folk thinking about tax policy, an important instrument for social policy. Why anonymous? And what to do about the inequities of local tax bases for public ed?

  4. Carol Lamparter June 9, 2018 / 11:17 am

    Well-written and extremely informative post. Thank you.

  5. Patricia June 8, 2018 / 6:09 pm

    Well reasoned commentary. Thanks!

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