Next week could be a big week for proponents of eliminating Pennsylvania’s hated school property tax.
Then again, this week was supposed to be a big week, until Senate Republicans postponed a plan to vote on legislation that would abolish the school property tax.
“We want to send the strongest bill possible to the House, and so we thought that it was worth taking the additional week to cross our Ts and dot our Is,” said state Sen. David Argall, one of the sponsors of Senate Bill 76, the property tax elimination legislation.
Argall, R-Schuylkill, expects a vote early next week. He said technical changes need to be made and waved off the notion there’s concern his legislation would not raise enough revenue to replace school property taxes. That, however, has been one of the central questions surrounding SB76.
Pennsylvania’s Independent Fiscal Office has forecast that school property tax collections will total $13.7 billion this fiscal year. That number will grow to about $15.5 billion in 2019-20, according to the IFO.
To replace property taxes, SB76 would raise the personal income tax from 3.07 percent to 4.34 percent. It would also raise the state sales and use tax from 6 percent to 7 percent and expand the number of taxable transactions.
It’s a huge and complicated tax shift to make, and one that would make winners and losers of various groups. Beyond that, there’s the key question of whether SB76 raises enough revenue.
The IFO analyzed the legislation two years ago, but it hasn’t updated those findings recently, Director Matthew Knittel said this week.
“I have to reserve comment on whether everything would add up,” he said.
In its report from October 2013, the IFO found that SB76’s revenue streams would adequately replace the school property tax in the first year (fiscal year 2014-15 in that analysis) but would not grow at the same pace as the school property tax. By 2018-19, there would be a gap of more than $1 billion, according to the IFO.
There are two ways to look at the gulf. It’s either a savings to taxpayers who otherwise would have been pummeled by annual property tax increases, or it’s a funding deficit that would leave schools in a precarious position.
“Depending on your point of view, one could characterize that either way,” Knittel said.
Argall sees it as a savings, and noted SB76 has a cost-of-living increase built into it. It’s just not as much as schools could get from hiking property taxes, he said.
Still, a coalition that includes a diverse mix of organizations from across the political spectrum — including business groups such as the Pennsylvania Chamber of Business and Industry, food banks and education advocates — believes there’s too much uncertainty.
“Senate Bill 76 calls for a fundamental re-organization of Pennsylvania’s taxation and educational systems,” the coalition wrote in a memo. “The potential negative consequences that could result from the implementation of Senate Bill 76 are vast, and many significant questions remain unanswered.”
Those conflicting perspectives will likely create a robust debate, should the bill go to a vote next week.
The goal of SB76 is to have the income and sale tax increases take effect Jan. 1, 2016, said Jon Hopcraft, an aide to Argall. The school property tax would be eliminated as of July 1, 2016, but schools could still collect part of the levy to pay long-term debt.
The state House struck down property tax elimination in October 2013. Proponents of the legislation have been waiting for another shot ever since, and they see the Senate as more receptive to the idea.
The Pennsylvania Taxpayers Cyber Coalition, a grassroots group pushing for elimination, has remained patient, even after this week’s vote was postponed.
David Baldinger, the group’s administrator, took to Facebook to urge his flock to remain calm. He invoked all caps to make sure his message was clear: “WE ARE NOT BEING PLAYED,” he wrote.
“The House has far more vicious opponents than the Senate and they will be looking for any flaw, no matter how minor, to discredit the bill,” Baldinger wrote. “If impatience rules and a bill with errors is rushed through we’re only screwing ourselves.”
Baldinger’s long-held theory states that the Senate, if it were to pass property tax elimination, would put extreme pressure on the more reticent House, maybe enough to change the outcome in that chamber.
However, such a scenario could also crack the Faberge egg that is the state budget framework. The state has gone almost five months without a budget, and a tentative agreement on a framework — not a full-blown budget deal — nearly fell apart once earlier this month.
That framework relies on a sales tax increase to fund some property tax relief, but it doesn’t kill the levy like SB76 does.
Tossing property tax elimination into the mix would complicate negotiations that already include many other moving pieces, such as increasing education funding, privatizing state-run liquor stores and finally agreeing on some version of public pension reform.
Argall admits he’s not sure what would happen to that framework if SB76 gained traction, but said his constituents would want elimination to become part of the overall deal.
First, lawmakers need to vote on the bill.
“You will have a lot of very angry people if we don’t vote on this,” Argall said. “They’ve been patient so far.”
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