SB 76 property tax scheme will hurt the poor and middle-class families

A bill making its way through the PA Senate pits children and working families against seniors and special interests. It would end property taxes for corporations as well as school property taxes, helping struggling homeowners only in the short-term while devastating our schools and making PA’s tax system even more deeply unfair.

Because Pennsylvania has long been among the worst states for its low percentage of state funding for public education, districts have had to continually raise property taxes to fund their schools. Under the guise of reducing Pennsylvanians’ taxes, the SB 76 tax scheme would in fact increase the overall burden on people and small businesses due to its increases to the state income tax and sales tax. It also would expand the sales tax to cover a wider range of services and goods – one very important good in particular: food.

Who supports SB 76?

A broad coalition of business groups, education and anti-hunger advocates, and faith communities oppose this bill. It is mainly large corporations and wealthy landowners who stand to gain from SB 76.

The National and Pennsylvania Associations of Realtors (NAR and PAR) also support SB 76 and created RealReform76.com to push its agenda. Realtors would profit from the huge boon to the real estate market that would come from eliminating the school property tax and large commercial property tax.

Also driving the support for SB 76 are Libertarians and Tea Party members – folks reflexively opposed to all forms of taxation, having to support public education, and, by the way, government itself. These groups are at least some of the member organizations of the Pennsylvania Coalition of Taxpayer Associations, a group that has fought school property taxes in PA for years.

They claim to represent the anguished cries for SB 76 that come from financially struggling homeowners – particularly the elderly, a demographic that has high voter turn-out and whom PAR has mobilized into vocal and strident supporters with promises (glossy brochure and web content pictured) about how SB 76 will help them.

What would SB 76 do?

What PAR and PCTA (and their online presence as Pennsylvania Taxpayers Cyber Coalition) fail to note is that SB 76 and its companion House Bill 76 come with their own huge price tag that would affect all Pennsylvanians: devastating cuts to our schools (which rely heavily on local property taxes) and thus our communities. Not to mention what it will do our grocery bills.

SB 76’s proposed sales tax increase – from 6% to 7% – would be expanded to cover food making Pennsylvania one of only three states to tax something that is vital to human existence. To try to justify this, PCTA/PTCC is promoting the myth that “food items exempt from the sales tax will be fresh meats, produce, and dairy, along with many packaged and canned foods that are in their natural form, without added sugar or other adulterants.”

Yes, SB 76 has sales tax exemptions for the limited food items that pregnant and nursing women can buy using their Women, Infants, and Children program (WIC) benefits. Only certain categories of food and certain brands, ingredients, and packaging sizes are WIC-eligible. Most packaged foods and specialty foods will be subject to sales tax under SB 76, as will organic food.

SB 76 would also add a sales tax to child care services, non-prescription medications, funeral expenses, non-tuition fees at some colleges, non-housing charges at many nursing care facilities, garbage collection, parking fees, taxis, and public transit.

The personal income tax would be raised by 41% – from 3.07% to 4.34%.

Pennsylvania already has the 6th most regressive tax system in the nation. Raising and expanding the sales tax and the hiking the personal income tax just shifts even more of the burden of funding government and public services onto those least able to bear it.

What would SB 76 do to education?

From the Pennsylvania Budget and Policy Center. Click to enlarge.

Pennsylvania is second worst state in the nation for its funding gap between rich and poor schools. The funding gap is over $14,000 per student between the richest and poorest PA district; the difference equates to more than $357,000 per year in a classroom of 25 students.

This is a problem nationwide. Because schools generally rely on property taxes for their funding, higher-valued houses and real estate generate more revenue and better-funded schools than districts with lower home values.

Because Pennsylvania is one of only three states in the nation that doesn’t use state funding to balance out gaps between rich and poor school districts, districts depend on a disproportionately high ratio of local to state funds, getting 80% of their local funding from property tax revenue. The outcomes are not surprising: state cuts to education funding are more likely to hurt low-income and minority students stuck in poor districts. These cuts have long-term effects on student achievement in high poverty districts.

Pennsylvania public schools desperately need a more equitable funding source than property taxes. But eliminating the property tax and making schools dependent on sales and income tax is not the answer:

• The sales tax is a regressive tax; raising it hurts those who are low-income and middle class more.
• An income tax still means that neighborhoods with wealthier residents will have wealthier schools and will not address the funding disparities that now exist between PA school districts.
• Both income and sales tax revenue dip during recessions.

SB 76 would also leave it up to voters whether school districts can levy any other taxes to raise money to repair or improve school buildings, likely forcing them to make even further cuts. It would also cap education spending at a rate lower than what school districts need to keep up with rising costs.

Don’t we need property tax reform?

Yes, there are fixed-income and low-income homeowners in PA who are struggling to pay for housing and they need help. But the answer is not ending all property taxes statewide.

From the Pennsylvania Budget and Policy Center. Click to enlarge

While there are segments of Pennsylvania with high property taxes, they are the exception. On average, Pennsylvania’s property tax rates are on par with Ohio and significantly less than neighboring states like New York and New Jersey.

This isn’t to say those who need tax relief shouldn’t get it. But there are better and more targeted ways to achieve that, like reinforcing existing assistance programs or creating new ones, and supporting reassessments and other reform measures.

For example, only some 70% of the seniors who are likely eligible actually apply for PA’s Property Tax Rent Rebate Program, which helps half a million of Pennsylvania’s elderly, according to the Pennsylvania Budget and Policy Center. This program could be better-funded (the base benefit hasn’t increased in 8 years) and the application simplified.

From the Pennsylvania Budget and Policy Center. Click to enlarge.

PA could adopt the “circuit breaker” programs some states use to reimburse low-income property owners if their property tax is a certain percentage of their household income.

Measures that don’t, by the way, eliminate all property taxes for corporations that own shopping malls, factories, skyscrapers, and other large commercial enterprises. Nearly one in four assessed properties in PA are commercial or industrial; much of that is corporate-owned.

Eliminating all property taxes in PA would be a gross overstep. It’s throwing the baby out with the bath water.

Almost literally – as it is our children who SB 76 will hurt most, by sinking their schools and taxing the food in their mouths.

What you can do:

SB 76 is currently being pushed by both Democrats and Republicans in the state legislature because the bill’s supporters are organized and persistent. Our senators have told us they need to hear more opposition. We must speak out against SB 76.

Call your state senator. Tell them: A bill that lets corporations avoid paying their share, that taxes food as well as child care and other necessary services, and that raises the income tax will not help our public schools and will make low- and middle-income Pennsylvanians pay even more. There are better solutions to reducing the property tax burden for struggling homeowners. Oppose SB 76!

Tweet to @PASenate and your senator!

This post has been updated since it’s original publication date to include new information.