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Pennsylvania “Property Tax Relief” and SB-76

A bill pending in the Pennsylvania General Assembly, SB 76, proposes to eliminate property taxes in Pennsylvania. This bill, like so many before it, is not likely to pass this year but conversation will continue. The property tax has been a constant source of debate in Harrisburg. At first glance, homeowners, especially those on fixed income, might see this bill as a welcome break for their budgets. A closer examination of the bill yields some deep concerns.

Property taxes provide significant revenue for the state, funds that support our public school system. If the General Assembly eliminates them, how will the Commonwealth raise the revenue to pay for education? SB 76 would raise sales taxes to 7% (currently 6%) and add food, clothing, and some additional services to the list of items that would be taxed. In addition, the bill would raise the state income tax to over 4%.

A sales tax on food and clothing would hit low-income people the hardest. Just as SNAP benefits are spent quickly and fully because low-income people spend what they have as soon as they have some income, taxing food and clothing will take money away from those least able to afford the extra expense. People on fixed income may welcome the break from property tax but they, too, will find that their food budgets will rise.

The years of debate and discussion about property taxes offer evidence that there is a problem looking for a solution. Senior citizens, in particular, who own their own homes, are eager for change. Too many of them whose incomes are fixed, worry about losing their homes. We have seen an impulse from funders like the United Way to keep people in their homes. At the same time, SB 76 would freeze revenue for schools at current levels. School districts are already struggling with their budgets; the proposed legislation would make their burdens heavier.

There are better ideas for providing relief while maintaining and growing revenue for schools. Expanding the Property Tax/Rent Rebate Program for seniors or linking the level of taxation to the household income. A small increase of the income tax rate – Pennsylvania has the lowest top rate of 42 states with income taxes – is possible. A severance tax, closing corporate tax loopholes, enacting a corporate minimum tax, and limiting further business tax cuts should be discussed.

For more information, see Pennsylvania Budget and Policy Center commentary on Property Tax Reform and SB 76.

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