Taxes Will Come Due for Renters if State Ends Property Levies
A proposal to replace school property taxes with sales and income tax increases could mean a savings for homeowners, while renters would see increases in their spending.
By Melissa Daniels | PA Independent
HARRISBURG — Eliminating school property taxes in Pennsylvania means some will win, others will lose.
The winners are retired homeowners, who could see a 37 percent decrease in their tax liability, according to the latest analysis of the most visible proposal on the table.
The losers are working renters, who could see a nearly 11 percent increase in tax spending.
Is this a good idea for everyone? Or just property owners? Leave a comment.
The tax reform proposal spelled out in House Bill 1776 and Senate Bill 1400 aims to swap about $13 billion in school property taxes annually with increases in sales tax, an expanded sales tax base and an increase in personal income taxes.
The latest figures, from a much-anticipated analysis by the state Legislature’s Independent Fiscal Office, show a windfall gain for homeowners but inconclusive results for the rest.
Some two-dozen lawmakers heard the analysis Monday morning at a joint meeting of the House and Senate finance committees and the Select Committee on Property Tax Reform.
The tax swap could save homeowners — but not necessarily renters — thousands.
Matt Knittel, director of the IFO, said it could take several years to realize any rent savings, noting that leases take time to expire. Beyond that, the proposed increases in sales and personal income taxes would be greater than the potential reduction in rent.
Another effect: Residents who use property tax as a deduction on their federal income tax filings would no longer be eligible. Statewide, federal income taxes would increase by $550 million annually without school property tax deductions, Knittel said.
Rep. Jim Cox, R-Berks,bill sponsor, said renters would see benefits in other realms. Some may be able to buy a house, affording a monthly mortgage minus the property tax bill, he said, while other landlords would have extra capital to spruce up properties.
The IFO analysis showed the tax swap would create a $1.5 billion shortfall to school districts in the first year. Cox said the predicted shortfall isn’t “a death knell” for the bill, and he would suggest an increase in the personal income tax rate to close the gap.
As written, House Bill 1776 would raise the PIT from 3.01 percent to 4.07 percent, but Cox said a rate of about 4.4 percent would fill the gap. He said he plans to file that amendment and is working with House leadership so the bill is addressed.
Though only several session days remain, Cox said he’s determined to get the proposal out for a floor vote – his proposal stalled in the House Finance Committee earlier this summer after lawmakers expressed uncertainty about the revenue numbers.
Cox said lawmakers and state officials can figure out the numbers, but it comes down to one question, he said.
“Do you want to replace property taxes with a broader sales tax a little bit higher with a higher PIT of about 4.4 percent?” Cox said. “Give us the answer to our question and we’ll go away, but for now people haven’t had the opportunity see their reps or senators vote on this.”
In the likely event no action is taken this session, the issue could be pushed to the next crop of legislators come January.
The Select Committee on Property Tax Reform will draft a report on recommended legislation for property tax reform by Nov. 30.
Rep. Tom Quigley, R-Montgomery, who chairs the committee, said he envisions recommending a multitude of options for tax reform, whether that’s a statewide change or enabling local reform. He said potential changes to the school funding formula could complement any property tax reform.
But the IFO analysis gives a blueprint for those changes, Quigley said. He said he believes relying on sales tax instead of property taxes for school funding is a fair distribution, as it comes down to consumption.
Families with children in schools are out there spending the most, he said, whereas the retired homeowners who would save the most money could decide how much to spend on consumer goods.
“The senior citizens, that’s who you hear the most from,” Quigley said, “someone who owns a home being taxed out of a home because they can’t keep up with those tax payments.”
PaulRevere
1:13 am on Friday, October 5, 2012
Public School Taxes should not be based on Home Values. Taxing Home values is Unfair to Childless couples and Those Parents using Non-Public Education.
Education is and Always has been available for many Homeowners through Local Non-public schools.
If Families could be relieved of the Forced Real Estate Property taxes, they would be able to TRULY CHOOSE their school to send their children. (Freeing up their Property tax obligations)
ALL Public school COSTS will be reduced substantially, as they would be put on level playing field with Private and other Non-public schools offering "Accredited Education".
Free Public schools should be State supported for the needy/poor only.
All state taxpayers should Support our Public schools through "INCOME" earned Taxation.
Elimate union wage. Billions of dollars will be saved by ALL Taxpayers for Public Eduation. No Doubt.
Parents choosing Private schools would be able to afford them once again.
A sales tax or Income tax supported public school system is 100% fair to all. Based on Income affordability. To tax on homes is unfair to the needy and poor. It hurts them as it is a tax FOR what should be "FREE EDUCATION". It's not Free.
Only the needy/poor will be using public schools (Free). That's the way it should be. Pick an income level, say $60,000. Anyone exceeding that $60,000 would have to pay any public school extra curricular things , like Sport facilities, Lunches, Auditoriums,Pools, having nothing to do with "Raw" Education.
brian shannon
5:37 am on Saturday, October 6, 2012
This is an area where Tom Murt ( great guy, but PAC man for the teachers union) should take a STAND and not just be safe. The plan would BENEFIT all homeowners and Towns.
The schools would stop using homeowners like a ATM every time they need money
Concerned Resident
5:52 am on Friday, October 5, 2012
Great idea to take the tax burden off homeowners alone!
Kate
8:28 am on Friday, October 5, 2012
It is a great idea, but as a homeowner with no kids why should I pay anything to the school system I do not use. I am not ready to retire, so you just take from me with a higher income tax, Why is that FAIR to ME! These day everyone wants everyone else to pay their FAIR SHARE. Well I am not part of the SHARE of the PUBLIC School System. I do not use it ergo, I should not have to participate in keeping it running!
Greg
9:03 am on Friday, October 5, 2012
Free public education is a benefit to the entire country. Do you really want only people who can afford it to be educated, and for everyone else to scrape by the best they can? Do you drive on every single road that your taxes pay for? Do you think you should only have to pay to use the streets that you personally use? What about the military? Why should you have to pay to defend the entire country, you should just hire a personal armed guard.
PaulRevere
12:40 pm on Friday, October 5, 2012
Greg:
Education is a benefit to the whole country.
The Problem is how MUCH IT COSTS.
1st-Shouldn't Education only include the Buildings to educate?
2nd-shouldn't the education not include all those extra curricular activities and buildings having nothing to do with education?
3rd- Education should be be supported by One's "Income" ability, not their shelter needs..
No noe is suggesting we completely rid of Education.
But massive changes are needed in the Payroll/Pensions/Benefits cost to ALL OF US.
All "Teachers" should be paid within the levels of "How much the People can afford" ,NOT HOW MUCH OUR HOMEs ARE WORTH.
Everyone should share in the Education Cost, not just those who own Real Estate.
A $40,000 Earner owning a $50,000 home should not Pay the Same Real Estate tax as the $100,000 earner owning a $50,000 home.
Do you see the tremendous discrepancy with the current system?
Kim
8:46 am on Friday, October 5, 2012
I actually agree with you Kate....and Im the parent of a (soon to be) school aged child. I am more than happy to pay my fair share into a system that I will actually use. I actually would prefer to use another option other than public schools but my beliefs eliminate Catholic schools and my income wont allow me to send my child to a private school. So, I am left with the option of public schools. But I do agree that paying for something you arent going to use does seem unfair. Then again, we all pay into Medicare and Social Security and services for the elderly that very well may not be around when I get to be old enough to take advantage of it. Also, we are ALL paying into the Medicaid system and providing food, health insurance and cash assistance to non working and disabled people. It seems that a good majority of the time, we are all paying for everyone else doesnt it? So I totally agree that its not a fair system.
PaulRevere
12:50 pm on Friday, October 5, 2012
Kim,Let's not muddy this discussion with Medicaid or Social Security.
Every worker supports their own social security. If you don't work, you do not get social security. Those who do --It's called Welfare.
That's exactly the way our schools should be. Their are many non-public schools to choose from (not just Catholic schools). Hundreds of other local community schools exist. To expect any Family who already educate their children according to the state's Accredited education to also pay "FULL" real estate tax rates to support All other children who choose public schools is absurd. All Public schools cost would COME down , if they did not force Parents to Pay TWICE for education. Our current system is a sham. Your Real estate taxes WOULD COME DOWN, if this law is approved. You would actually pay less real eatste taxes.
Greg
8:54 am on Friday, October 5, 2012
Renters actually do pay property tax. The landlord pays property tax, and it's just one of the many things that go into setting the rent. Renters will end up paying twice, because almost no landlord will pass the property tax savings on to their tenants.
Kate
9:46 am on Friday, October 5, 2012
Greg, I do not mind paying my township taxes. Like the one where they cut trash pickup and leave the price the same. I mind paying for the school system. If I had 4 kids going to school I wouldn't mind one bit paying 3 times the amount of tax that a family with one child pays. IT'S ONLY FAIR!!!
Jeff Lugar
11:21 am on Friday, October 5, 2012
When landlords are competing to get renters to begin with, one or two will eventually drop the asking price based on saving property tax. Once that happens, they'll all have to, because those that don't will be overpriced and risk having their property sit empty with no tenant and no income being made.
PaulRevere
1:00 pm on Friday, October 5, 2012
Greg:
It's nice to see your logic, that "Property taxes" paid by your landlord are actually "PAID BY YOU".
With that thinking , you should spread the word that Any Federal Taxes or Property tax increases on "any Business" is actually PAID BY YOU. That means that pizza parlor down the street. That means that Restaurant you eat at every day.
That is exactly why the Education part of Real estate tax Must become a State funded function where ALL directly Participate. Guaranteed reductions in All Real estate taxes would happen, if Our schools were supported by those who Spend the most. That means High income people. INCOME not Home value assists ALL HOMEOWNERS.
The current system is Archaic. It needs to be changed.
This law is a good start. But our School Costs need to be addressed.
Barbara
8:56 am on Friday, October 5, 2012
Your home values and the amount you can sell your home for are based partly on what school district you are in...good district...people want to buy a home in your town. That is partly an excuse for property taxes.
PaulRevere
1:13 pm on Friday, October 5, 2012
Barbara: Home values are based on the schools in the area. That includes the many private and Catholic and other faith based schools historically providing the equivalent or more Education needs of much of society.
If Public schools are needed to provide education to those who cannot "AFFORD" their local community school, then we should provide for that.
But to require everyone to support a "free public education" to families Who can afford their own education needs is absurd.
The current system puts Billions of dollars in the hands of Our Teachers to pay their high wages because They are collecting Real Estate taxes from Families who do not send their children to public schools. They love the set-up.
That is like you supporting someone else's Hair-dresser while you use your own hair-dresser. Would you support 2 hair dressers just because the district required a "Public hair-dresser".
It is unfair to You and All. Let's fund our public schools ONLY for the needy/poor and those who do not have another Education means. I am for that.
I know that ALL Families will get substantial reductions in their Real estate taxes, because society is currently wasting money Paying Teachers for students NOT even attending the public schools.
If you understand that , you should conclude how nothing is changed in your life.
Chris
11:00 am on Friday, October 5, 2012
Don't forget--Renters are already paying property taxes. I sincerely doubt landlords are charging a rate LESS than what the combined mortgage value + property tax + basic maintenance rate is. A Renter's rent covers property taxes, they just don't get the federal tax reduction--the landlord does. All this appears to be is a way to further shift an onerous burden onto an already financially overburdened generation of parents and working poor now that the "senior class" got theirs.
Kim Murphy
11:37 am on Friday, October 5, 2012
As a renter I know I'm already paying my landlords property tax as well as all the other taxes he acquires from collecting rent, and I know if his property tax was decreased I'd never see a decrease in my rent.
On the other hand I have always liked the idea of a flat sales tax verses income tax for the simple reason we have too many people who pay no income tax at all and the rest of us footing the bill. What I can't understand is why they always want to hike it up so much, if you are collecting an additional 1% from everyone it has got to be more than collecting 12% - 35% from a portion. I see allot of people considered the poor that drive better cars, dress more expensively etc... than I do. We all purchase items equivalent to our income weather it be earned or not. Yes, the rich spend more so would have a higher tax and yes the poor do spend so they would be paying taxes but it might take some burden off the middle class who seem to foot the bill again and again.
http://www.EliteWaterDamage.com
PaulRevere
1:24 pm on Friday, October 5, 2012
Kim:
If the Home Value is not removed from the funding of Public schools, every homeowner will one day be faced with Real estate taxes so high , that it could be equal to 10% additional tax on many middle-income earners.
The ever increasing Educator wages will sponge every home value increase from society.
Our Homes should not be used as a source of Pay for anyone. Yet,that is exactly how the current Real Estate tax us used. Your home improvements cost you many dollars. The home goes up in value. Why should the public school get the additional taxes when you made the improvements.
A sales or income tax system would make the public constanly watch the pay scales of Public schools vs the Cost of Alternative educations.
PaulRevere
1:41 pm on Friday, October 5, 2012
It's time the COST of public schools vs. the cost of any non-public school "EDUCATION" be discussed.
Your Real Estate tax only supports 30% of the actual per child cost of Public schools.
Public schools are "NOT FREE".
70% of the cost comes from Businesses and Federal Govt.
That, Ladies and Gentlemen, is the truth. Puyblic school actually costs MORE per child than ANY non-public school.
Main Reason is Teacher Union wages vs. other Teacher Wages in non-public schools. So go ahead and google your public school district total annual expenditures. Then divide that by the number of students.
That gives yo a Cost (like tuition) to educate per child.
Now call your local non-public school and ask what their tuition is.
You should be very surprised that the non-public schools Tuitions ARE lower in cost than supporting public schools.
People of Faith should not have to support those who choose "No Faith" in Education of our children. It is time for those who send their children to public schools to decide whether non-faith should trump those with a Faith.
If you earn over $50,000 and Choose to be of no-faith, then our current Real estate tax system Forces all Faiths to support your "affordable" education needs.
That is why ALL support of public schools must go to ALL society based on Income.
The current system actually "STEALS RELIGIOUS GROUPS MONEY"
Trumping my Education in support of Non-Faith Rich people must end.
VOTE NO MORE REAL ESTATE TAXES!. Free my Educ money.
VICTORIA MILLER
4:43 pm on Monday, October 8, 2012
i am 78 years old never had kids in our schools i own my small house.
my school taxes are 2,800 a year. i am on ss and pension i get around 10,000 a year.which is around i pay my bills. i spend around 25 a month to buy food....
is this the year i am forced out into the stree for the hungry school taxes.
oh medicare.....i do not go to any doctors..... i do not use perscriptions.
victoria