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Senate Democrats Look To Rebates To Solve School Tax Concerns

Senate Democrats

  Democrats in the Pennsylvania Senate have offered a compromise plan that would shift school funding from property taxes to a mix of sales and income taxes but would not make the payments directly to school districts.

“We are trying to change the culture. I call it a paradigm shift in how we pay taxes,” said Sen. Jim Brewster (D-McKeesport). “The burden of school property taxes has fallen on a group of folks and it’s now time to look at that and change that methodology so that everyone shares in that burden for education.”

The plan would offer property tax rebates of up to $1,990 for homeowners and $500 rebates for some renters. State Senate Democratic Leader Jay Costa (D-Forest Hills) estimates it would effectively eliminate school property taxes for 2 million homeowners.  The Rebates would go to as many as 800,000 renters who earn less than $50,000.

“The taxpayer would be making the payment to the school district, and once they bring notice and proof of their payment, the state would send them a check in the amount of up to $1,990,” Costa said.

Costa expects the plan to result in $4.4 billion in tax and rent relief payments. Those payments would be funded through a .78 percentage point increase in the state’s personal income tax, a .6 percentage point increase in the state's sales and use taxes and an expansion of the tobacco tax.

“This bill would finally bring fairness on how we fund our schools,” said Sen. Lisa Boscola (D-Lehigh). “The property tax base alone is just too small to absorb the ever-increasing school costs and sustain an adequate funding level for our schools.”

The plan is expected to win favor in Philadelphia because it allows the city to craft its own tax shift.  Philadelphia currently uses a substantially different tax system to fund its city school system, the largest in the state.

Costa said the Independent Fiscal Office studied the plan and reported the funding mix is sustainable in the long term.

Sen. John Blake (D-Lackawanna) stressed the sales taxes would not be expanded to any items that are not already taxed.

“We are not expanding the tax base in an onerous way," he said. "We are not doing things that we think might have an adverse impact on the performance of the economy.”

Gov. Tom Wolf’s budget proposal would add legal and other services along with a few other items to the state’s sales tax and begin to tax tobacco products other than cigarettes.  

Neither Wolf nor state republicans have indicated their stance on the proposal.