New Castle News

Closer Look

September 14, 2013

John K. Manna: State should foot the bill for education

NEW CASTLE — OK, here’s my periodic look at property tax reform in Pennsylvania, or the lack thereof.

Rep. Seth Grove of York County offered the latest proposal to deal with school property taxes. He calls it the Optional Property Tax Elimination Act.

Under his bill, school districts could levy additional wage taxes, mercantile and business privilege taxes. In return, property taxes could be reduced on a dollar-for-dollar basis. This proposal would give school districts the option to levy these taxes as a substitute for the property tax. However, they would have the option to retain the status quo.

Grove argues that his bill provides local control, keeps all money raised with the school district and allows for complete elimination of the property tax.

While this sounds great at first glance, here’s the rub, at least as to how it would apply in New Castle, and maybe other cities.

The city of New Castle already levies mercantile and business privilege taxes, so the option would essentially end up as an increase in those taxes and would not be welcomed by businesses and professionals.

Plus, because the city has been declared financially distressed under Act 47, it is allowed to increase the tax above the state-imposed 1 percent limit. So, city residents are already bearing a bigger burden than most.

Non-residents who work in the city are also paying a higher wage tax under Act 47. How much more can both city and non-residents bear?

In short, the problem with some of these proposals is that the same taxpayers would be hit twice.

The solution is simple, but one that may never see the light of day in Harrisburg. An editorial in the Standard Speaker of Hazelton recommends replacing property tax revenue with revenue derived from the largest tax base — that covering the entire commonwealth.

In other words, the best option is to replace the property tax with state revenue. The state already subsidizes some local education costs, so why not go all the way to 100 percent?

The argument against would be that it would eliminate local control.

In some instances, taxpayers would probably prefer less local control.

There would be those who would argue that rural areas would be helping to subsidize larger districts. But conversely, people in urban areas would also be paying for smaller districts.

Having the state foot the bill would provide for the lowest possible tax rate on individuals through the state income or sales tax, or a combination of both.

Any other way would increase the local tax burden and would not do anything about correcting the disparity in education funding.

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