- By Rep. Frank Ryan (R-Lebanon)
There have been discussions about eliminating property taxes for decades. Now, the day of reckoning has arrived. The School Property Tax Elimination Act – House Bill 13
– is in its final draft after two years of meetings and extensive discussions with affected groups and individuals to determine how best to proceed.
First, my bill would eliminate school property taxes 100%.
Second, the majority of the replacement taxes would remain local to our school districts.
Third, we have created a concept called a “local Personal Income Tax” and “local sales tax” to ensure the new taxes remain local.
Fourth, the replacement taxes for the $15 billion in school property taxes that must be replaced are made up of the following items:
• A local Personal Income Tax of 1.85%, which would be paid directly to the school district.
• A local sales tax of 2% would be added to existing items that are already taxed by sales tax and these taxes would be allocated to the school district in the county to which the sale took place.
• A local sales tax of 2% only would be added to food and clothing. These items would not pay the full 6% sales tax. Further, anyone receiving SNAP benefits or public assistance would be exempt from sales tax on food.
• Social Security would not be taxed.
• Retirement income would be taxed at a rate of 4.92% with 3.07% of that tax going to the state and 1.85% of the tax going to the local school district. Seniors would save 75% of all the taxes that they currently pay.
• Landlords would be expected to lower rents by the amount of property taxes saved unless they can prove that they did not raise rents when property taxes went up.
Fifth, we have created a lender of last resort for school districts that run into financial distress. A fund of $500 million is designed to protect the school and community in the event of a catastrophe.
Sixth, school districts would be prohibited from reinstating a school property tax. We have established a working commission within the Pennsylvania Department of Education that would allow for legislative fixes or executive branch intervention in school districts with unanticipated financial problems.
My bill is a unique approach to solving one of the most complex financial issues I have seen in my career, but we must act now. If property taxes are not eliminated this year, it may never happen. Another recession would do more damage to property tax elimination than you can imagine.
Under my bill, no group would benefit more than any other with the exception of senior citizens who are less well-off and young families. In more than 200 meetings, I gathered public input and worked to examine every conceivable critical success factor.
The greatest concerns that people expressed to me were:
• They did not want the money to go to Harrisburg. I agree.
• They did not want the school district to retain the ability to re-establish a property tax. I agree.
• Renters, who make up over 40% of our population, felt they should also see the benefit since property taxes are factored into their rents. I agree.
• Some seniors believe they should not have to pay any taxes. I wish I could agree, but as a senior myself, I cannot because so many young people and businesses are leaving the state.
My analysis shows that if we passed the entire property tax burden onto younger people and if younger people were paying all of the costs of taking care of seniors in the state budget, in three to five years the state would no longer be able to pay its bills. It would then be necessary to restore the property tax for all
plus impose a tax on retirement earnings. That is unacceptable to me. My bill, House Bill 13, would eliminate property taxes entirely.
• The unfunded pension liabilities are viewed as a crisis. The recently enacted pension
reform will start to fix that problem.
Eliminating the property tax is critical to the economic survival of the Commonwealth and its citizens!
The Independent Fiscal Office five-year outlook provides insight into Pennsylvania’s stagnant growth and substantial budget shortfalls. When combined with declining population for citizens under age 60 and significantly increasing population for citizens over 65, the trends continue to be negative for the Commonwealth.
If we take decisive action now to reform our tax policies for working families, seniors, businesses and school districts, with the fundamental shift in the elimination of property taxes we can reverse these negative trends, but we must take the problem seriously. The solution I am proposing would address these issues and provide for an orderly phase-in to enable schools and communities to adapt to a new system with no major disruption to the educational opportunities of our students.
A copy of our the current version of “The School Property Tax Elimination Act” can be found at my website repfrankryan.com
. Frank Ryan, CPA, USMCR (Ret) represents the 101st District in the PA House of Representatives and can be reached at email@example.com
Representative Frank Ryan
101st Legislative District
Pennsylvania House of Representatives