New Castle News

September 25, 2013

Our Opinion: Proposal to eliminate school property taxes is revamped

By Staff
New Castle News

NEW CASTLE — A new proposal in Harrisburg to do away with school property taxes makes more sense than earlier versions.

But a new bill would oblige local taxpayers to pay closer attention to funding decisions. It also likely would lead to a further erosion of state support for public education.

The focal point of the new plan is the same as the old one: The elimination of property taxes used to support local schools.

Instead, districts would be allowed to replace property taxes with hikes in the personal income tax and business privilege tax.

A previous legislative proposal would have raised the state sales tax in exchange for doing away with the property tax.

But there were two stumbling blocks to this plan. The first was practical: It did not come close to providing the revenue necessary to offset property taxes.

The second was more philosophical: Use of the sales tax to fund education would shift control of virtually all education funding to Harrisburg. Inevitably, this would have led to increased state control over education matters.

The new proposal addresses both of these concerns, in that it is designed to give districts the opportunity to raise sufficient revenue from other sources, while keeping the control of tax rates at the local level.

But that raises a new concern. Currently in Pennsylvania, school districts face restrictions over the amounts they can raise property taxes in a given year, without going before voters for approval.

Typically, districts bend over backward to avoid that option, fearing rejection if the public gets the rare opportunity to control its own tax rate.

It’s unclear at this point if there would continue to be some sort of limitation placed on school district tax increases if the collection mechanism changes. From the perspective of a citizen, does it matter that much if the taxing authority is at the local or state level, when the end result is more money out of their pockets? And if state officials grant new taxing power to school boards, they may be inclined to cut education funding.

In any tax shift plan, there are inevitably winners and losers. Winners under the latest proposal most obviously would include retired homeowners. They would rid themselves of school property taxes without worrying about higher income levies.

Conversely, losers would include the employed. They might get a property tax break, but presumably this would be more than offset by higher earned income taxes. Someone will have to pick up the slack left by retirees.

Business groups also are concerned districts might find it politically palatable to boost the business privilege tax — a move that might discourage future growth.

This tax shift plan is a long way from becoming a reality. But it’s not too soon for taxpayers to consider its impact.