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Politics & Government

State Senate Committee Passes Bill To Abolish Property Taxes

A bill to eliminate school property tax in Pennsylvania was advanced by the Senate Finance Committee Tuesday on a 6-5 vote.

The “Property Tax Independence Act” would replace property taxes by increasing the state income tax from 3.07 percent to 4.34 percent; sales tax would jump from 6 to 7 percent (8 percent in Allegheny County), together generating an estimated $12 billion for public schools annually.

But, Sharon Ward, director of the Pennsylvania Budget and Policy Center, said the numbers don’t add up.

“It would eliminate property taxes, but fail to raise enough money to make our schools whole,” she said. “So really what this bill does is to make severe cuts to public schools that are still reeling from the cuts that were made four years ago.”

The 2014-2015 estimated basic education budget in Pennsylvania is about $5.5 billion, roughly the same as it was in 2008-2009, prior to the introduction of federal stimulus funds.

The Independent Fiscal Office estimates the bill could cost school districts as much as $2.8 billion by fiscal year 2019, but schools would have the option to implement district-level income taxes as a new source of revenue.

Under the legislation, Ward said items such as food, nonprescription drugs and diapers will be subject to sales tax.

“In the end, it’s not a free lunch,” she said. “It’s simply a tax shift and many people will pay more.”

Committee Minority Chairman Sen. John Blake (D-Lackawanna) voted for the bill, but like Ward, has several concerns.

“I’m concerned that about 35 percent of the local tax burden is currently borne by corporations across the state, and if this were to become law, they would no longer share that burden,” Blake said. “I’m concerned about the highest sales tax in the nation on our two largest cities that would result if this became law.”

But Sen. John Yudichak (D-Luzerne) supports the bill, calling the property tax funding system “archaic.”

“If you live in a school district that is not affluent, that does not have a property tax base, you are going to get less education,” he said. “That is unacceptable in Pennsylvania.”

A companion bill in the House has been sitting in committee for the last 18 months.

The legislation must be approved by the Senate Appropriations Committee before it can be considered by the entire Senate.