OP-ED: Explaining Pa.' school tax elimination bill

State Sen. Mike Folmer
48th District
Senator Mike Folmer speaks during the Legislative Panel Discussion on the State Budget as the York County Economic Alliance hosts its Spring Legislative Luncheon at Wyndham Garden York in West Manchester Township, Thursday, May 17, 2018. Dawn J. Sagert photo

I’m proud to stand with state Sen. David Argall and other Senate colleagues in supporting Senate Bill 76 to eliminate school property taxes because I believe no tax should have the power to leave you homeless.

SB 76 is the only plan being offered today to totally eliminate school property taxes — not partial reduction, not elimination for some but not all taxpayers, and not a new program to lessen property tax burdens. SB 76 provides for the total elimination of school property taxes.

Taxpayers have been — and continue to be — generous in their support of Pennsylvania education. Local school property taxes across the commonwealth over the next two years will cost taxpayers an estimated $14.22 billion. This is in addition to state and federal tax moneys.

It’s only a matter of time before the current system to fund education becomes unsustainable and completely overwhelms taxpayers. Every year, school property taxes rise by about $500 million. At the same time, the cry for total elimination of these levies also grows. It’s probably why voters approved a 2017 amendment to the Pennsylvania Constitution to expand the so-called “homestead exemption."

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This exclusion provides for the 100% elimination of the assessed value of each owner-occupied property (previously, the exemption was 50% of the median assessed value of homestead properties). The homestead exemption does not include commercial and retail properties, rental and vacation properties, or factories and industrial facilities. It also gives another option in the much needed and long overdue goal of eliminating school property taxes.

To totally eliminate over $14 billion in school property taxes, you need alternative revenues and there are just four realistic options for replacement moneys: Personal Income Tax, Earned Income Tax, Sales Tax, or some other — new — tax. A homestead only exemption requires about $8.5 billion in alternate taxes.

SB 76 eliminates school property taxes using three of these four options: expand the PIT and Sales Tax to replace school property taxes dollar-for-dollar while giving schools the ability to raise additional revenues through either a local PIT or EIT — after voter approval.

Each 0.1% increase in the Personal Income Tax generates about $400 million in replacement revenues. A 1% Sales Tax increase from 6% to 7% (7% to 8% in Allegheny County and 8% to 9% in Philadelphia) raises about $1.7 billion and an expansion of the base raises even more.

Admittedly, expanding the base is what causes much of the opposition to the plan.  However, the proposed expansion would exempt clothing under $50 and would not include food items on the WIC list: fruits and vegetables, milk, cheese, yogurt, juices, infant food, whole wheat breads and grains, breakfast cereals, peanut butter, and eggs.  The proposed expansion would include foods with little nutritional value: sodas, fruit and sports drinks, cheese spreads, and foods with added sugars, fats, salt, or oils.

To calculate how an expansion of the Sales Tax changes would impact you, look at how much you now pay in school property taxes. For each $1,000 in current school property taxes, you would need to spend an additional $14,285 on the newly taxable goods or services.

Some critics of this plan focus on a proposal to protect schools: retaining some property taxes to cover outstanding debt. Such claims are misleading as once current debts are repaid, all school property taxes would be totally eliminated.

The clock is ticking: Property taxes continue to rise and taxpayers continue to bear the burdens. There’s just one plan to completely eliminate school property taxes: Senate Bill 76, which I support because no tax should have the power to leave you homeless.

— State Sen. Mike Folmer represents the 48th Senate District in the Pennsylvania State Legislature.