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CPA Now
Aug 13, 2012

Property Tax Plan a Sham

By Peter Calcara, Vice President - Government Relations
As the Pennsylvania General Assembly continues to grapple with the elusive, decades-old issue of property tax reform, one proposal under consideration is more political theatre than substance. To make matters worse, proponents are using threats and scare tactics to generate support.

This isn’t the first, nor do I suspect last, property tax “reform” effort I have seen in my nearly 25 years working with the legislature in Harrisburg. I remember the first serious effort started under the late Gov. Bob Casey in the mid-1980s. His comprehensive property tax reform plan passed the General Assembly by the narrowest of margins, but voters resoundingly rejected it once they understood the details and how they would affect them. Other property tax reform proposals have since come and gone.

Property Tax imageProperty tax reform is more than a simple exercise in arithmetic. The magic number may be 129 — 102 members of the House, 26 members of the Senate, and, most importantly, the governor to pass legislation — but getting consensus around a reform plan has been elusive. Part of the reason is that the magic number is an illusion. Pennsylvania’s system of local government is a labyrinth of more than 2,500 different entities, all with their own governing bodies, and a plan that satisfies the powers-that-be in Mt. Carmel won’t necessarily work in Upper Merion.

The ill-conceived “Property Tax Independence Act,” which is state House Bill 1776 and Senate Bill 1400, is nothing more than snake oil. Proponents say it will eliminate school property taxes and replace them by raising the personal income tax by 1 percent to 4.07 percent and increasing the sales and use tax rate to 7 percent. The plan also expands the goods and services that are subject to the tax.

What proponents fail to mention is that the plan will NOT eliminate all school property taxes. The bill specifically calls for retaining property tax to pay for a school’s debt service. Additionally, according to the Pennsylvania Department of Revenue, the plan will create at least a $3 billion funding gap between what it will actually raise and what school districts need to eliminate property taxes. Plus, the bill has Constitutional questions (treating similar taxpayers differently) and administrative concerns (the bill allows for a local personal income tax).

Throughout this debate, the PICPA has actively engaged lawmakers to discuss the negative ramifications this proposal will have on Pennsylvania’s economy. The PICPA has on numerous occasions testified (the only accounting organization to do so) before committees in the House and Senate, and sent a letter to the editor to newspapers across the state to keep taxpayers informed. We will continue to represent the interests of our nearly 21,000 members by working with lawmakers on this important issue.

There are no quick fixes, silver bullets, or miracle cures in this debate. Hopefully lawmakers won’t fall prey to this political charade.

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Disclaimer
Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of PICPA officers or members. The information contained in herein does not constitute accounting, legal, or professional advice. For professional advice, please engage or consult a qualified professional.