Government
6:43 pm
Wed October 17, 2012

Should Local Property Taxes be Replaced with Higher Income, Sales Taxes?

A special committee of the Pennsylvania state House will issue tax reform recommendations late this fall, revisiting a list of decades-old ideas on how to eliminate local property taxes by increasing the statewide income tax or sales tax.

Such a change would shift the tax burden for funding public schools from the local property owners to those who earn earn income and make purchases at stores within the district. Representative Tom Quigley (R-Montgomery), chairman of the committee, said the change would be especially beneficial to retired homeowners, whom he said supply a disproportionate share of school district budgets.

"If you're a retired individual, you're not necessarily earning money that's going to be taxed at the Pennsylvania income tax level," said Quigley. "You're purchasing less, theoretically, because perhaps it's just you and your spouse as a retired couple, so you're not spending a lot of money like you did when you had children or when you were younger."

However, Quigley noted that there are "winners" in the current property tax system who may be resistant to change.

"Their school district or their county has a tremendous business base. They have more affluent or wealthier people who don't necessarily mind paying a little more because of the quality of their public schools. Those individuals may be reluctant to participate in a plan that's now controlled from Harrisburg, as opposed to their local school district," said Quigley.

It may be best to provide a local option to eliminate property taxes, said Quigley, because the homeowner's tax benefit wanes as the value of the property in question decreases. For example, he said the change would make the most sense for Pennsylvania's southwestern and southeastern corners, where property values are higher.

"Quite frankly, people who are in the central part of the state, northern, northwestern or northeastern tier -- they, as a retired homeowner, may actually see an increase [in taxes], because they're only paying a couple hundred, $800 or $900 in property tax, but now you're expanding the sales and the income tax," said Quigley.

He said the local option could either be adopted by local elected officials or put to a voter referendum.

The special committee chairman said his panel will issue its report to the state legislature on November 30. Quigley said he doesn't expect any action on the recommendations until the 2013 legislative session.