Today, the House Finance Committee held a lengthy public hearing on Representative Cox’s HB 1776 or the Property Tax Independence Act to eliminate the school property tax code in favor of raising sales and income taxes.
The committee hosted six outside speakers to discuss the impact of this legislation but first in the hot seat was Representative Cox himself. He began by summarizing the legislation, which boasts 70 cosponsors. Were the bill to be adopted, schools and school boards would no longer be permitted to raise or levy school property taxes, except to cover the cost of their preexisting debt. Cox provided information that there are approximately 19 school districts in the Commonwealth who are debt-free, and the average school’s debt takes up 10 percent of their budget. In these districts, property owners would see a 90 percent decrease in their school property taxes, and when the debt was paid off, the tax would disappear.
To make up for the school’s lost revenue, Cox proposed an increase in the sales and earned income taxes. Both right around a 1 percent, the increases also have several caveats. Clothing purchases under $50 would not be taxed and food items on the WIC list, essentially a list of foods considered nutritious and necessary, would also not be taxed. Cox believes that this will increase will still provide enough revenue to schools, as well as lessen the burden on property owners who are forced out of their home due to high and ever-increasing school property taxes.
Speaking in support of the legislation were the Pennsylvania State Grange and the Pennsylvania Farm Bureau. The State Grange agreed wholeheartedly with Cox’s belief that property taxes are unfair, especially to farm owners; the Grange went as far as to call them “cumbersome, burdensome and costly.” The Farm Bureau went on to explain that farmers are particularly hurt by property taxes because often, they are “land rich and cash poor” which makes their property taxes high despite their lower revenues.
In opposition to the bill were the Pennsylvania Retailers Association, a representative from theNational Federation of Independent Businesses, the Pennsylvania Bar Association and thePennsylvania Budget and Policy Center. Retailers and NFIB opposed the legislation on the grounds that the taxation would slow consumers and that compliance to this complicated bill would cost businesses time and money. The bill also would place a tax on legal services, which the PA Bar Association opposed, saying that legal services are more often than not an essential service.
However, the harshest critic of the legislation was the Pennsylvania Budget and Policy Center. Michael Wood, research director of the Center, questioned nearly all of the merits of the bill. He pointed out that while property taxes are unpopular; eliminating them at the state level was meddling into local issues and applying a one-size-fits-all approach to the many different and diverse municipalities of Pennsylvania. He called it bad policy that depends wholly on risky and unknown factors, especially since there is no funding formula in place for how schools will be allocated money without their property taxes.
Despite these criticisms, Cox remained confident through the hearing that with amendments and continued education on his bill that he would garner the support of the majority of the House.