FundingHow this plan is paid for
Won't school property taxes just come back?No. The bill provides complete elimination for school property taxes.Bill text:"the school district may not levy, assess or collect real property taxes"Bill text:"Penalty.--During any attempt after the prohibition under subsection (a), by a school district to reinstate real property taxes or levy against real property, the school district may not: (1) Receive any future disbursements through the fund. (2) Impose a personal income tax under Subchapter D of Chapter 90A (relating to personal income tax)."
Weren't casinos supposed to fix this?
Casino gaming was to provide property tax "relief" (a word we hate in favor of complete "elimination).Casino gaming generates less than $0.6B (of the needed $16B) each year and passes on a tiny reduction in school property taxes. Also consider that he growth of property taxes (3.2% per year) means the value diminishes over time.The casino tax was sold to taxpayers as a significant reduction. Although it made a tiny dent, it came nowhere close to the 100% relief we are looking for.
Is the Sales/Income tax stable?Yes!There's a misconception that property taxes are the only stable tax. But, Sales and Income tax have proven to be stable, too!We hear the (faulty) argument that sales/income tax don't survive economic downturn.Thankfully, we have data to prove otherwise. In the 2008 recession, we saw a downtown in the economy. While sales/income tax revenue did drop, it never fell below inflation.The PA sales tax has remained at 6% for over 50 years, and the income tax has remained largely unchanged (<1% increase) over the same time period. These two stable taxes have been used to meet PA's obligations for a long time.
Note in the below figure (from IFO Special Report 2013-7), the area marked by "1" represents the "Great Recession" of 2008. The Sales/Income tax remain above CPI (inflation) even in poor economic conditions.
Can we do an 'All sales' or 'All Income' tax version?No.We believe there is a 5% income tax threshold that lawmakers and PA residents will not accept if it is exceeded.We also believe there is no appetite to exceed a single-digit sales tax.The current plan places the tax limits at 8% sales and 4.92% income tax, and expands each to cover more items.(A 'sales-only plan' might exceed 14% or more. The income tax would need to exceed the 5% threshold.)
What are the benefits to schools?
- Schools receive funding from LOCAL sources (Sales & Income tax) that do NOT pass through Harrisburg's General Fund.
- Schools may now save for a rainy day (like a business can) by removing savings caps.
- A $500M emergency fund is created to aid schools who need help
- Schools no longer have taxpayer animosity from the school property tax
- Unfunded mandates are now a responsibility of the legislator, not assumed to be passed on to property owners by schools
- The Bill provides 3 years of current funding to ease the transition to a Sales/Income tax model.
Will school funding be flat going forward?
No. The move to Sales and Income taxes means schools get dollar-for-dollar funding up-front, and, as the economy grows, so does the tax revenue to fund schools.In other words, school costs will continue to rise, but so will the revenue from taxes. (Sales and Income taxes rise with the economy.)(Also see the FAQ on 'unfunded mandates')
Why not tax adult-use cannabis, fracking/severance?The revenue needed won't come anywhere close.Adult-use cannabis:
Even optimistic tax estimates or aggressive tax rates, PA would still bring in less than $0.5B in revenue. (We need $16B to replace property taxes.) For a real life example, California (in 2020) with a population triple Pennsylvania only generated $1B in tax revenue.Fracking/Severance:With a revenue of less than $0.3B, it falls far from the $16B necessary to replace property taxes.
Mechanics: How the bill works
Does it have bipartisan support?
In today's political climate, many issues polarize people to 1 side or the other.
However, the Property Tax is equally hated. Support for elimination comes from all political viewpoints (Democrat, Republican, Independent), all ages (working-class families to older Pennsylvanians), and all living situations (owning property, renting an apartment, owning a small business).
The last vote on this issue had bi-partisan "YES" votes, failing by only 1 vote in the PA state senate. Since then, additional changes to the bill (improved as "House Bill 13") were made after receiving feedback from all interested parties (including renters, homeowners, school unions, food banks, and more).
What's the timeline? When will taxes change?
- 2022: Bill Passes
- Oct 1, 2024: Sales/PIT collected
- Dec 31, 2024: Last property tax collected
Why is some retirement taxed? What about Social Security?
Social Security is NOT taxed by our plan.
Some have misinterpreted our plan as a 'tax on seniors'. However, after the plan is passed (as written) it would mean 80% of all sales and income taxes are paid by working families, NOT seniors.
Expanding the Income tax is a SMALL portion of our plan. And without it...
- #1 - Your kids and grandkids will shoulder the tax burden
- #2 - The Retirement tax is coming to PA, with or without property tax elimination
- #3 - Without it, increased costs of senior care will bankrupt Pennsylvania
- #4 - Senior/Retired homeowners will save the most money, even with a retirement tax
- #5 - Pennsylvania already has a tax on retirement
We have explored all of these points in detail on a dedicated page here!
I rent. Will I see any benefit?
Very likely, Yes!
- We are asking landlords to tell you how much of your rent goes to property taxes. (Statewide 10-15% of your rent goes to ever-rising property taxes.)
- Then, once property taxes are eliminated, landlords will reduce (on your next lease renewal) your rent by the amount of property tax.
Is it fair to landlords? Yes.
- The property tax burden they pay is eliminated with our plan
- They will not incur any losses by passing the savings to you on the next lease term
All renters will see this relief, but with 1 exception:
- If your landlord can show that (in the prior 5 years) they did NOT pass along the property tax increase to you, they may skip this requirement.
Why 'elimination' and not 'relief'?
We hate the term "Relief". Why?
- Property taxes rise faster than inflation, so "Relief" is only temporary. The rise in tax soon eclipses the relief.
- It also perpetuates the existing unfair system where there are clear "winners and losers".
- Despite good intentions (such as a 'stop-gap' fix by your favorite legislator), it only kicks the can down the road, only to be dealt with again in the future. (Each time is progressively harder to solve.)
- PA residents are often over-promised with "relief" and results in a big letdown (see our FAQ on Casinos, Severance tax, and adult-use cannabis)
The only solution is to eliminate property taxes entirely.
(Ok, we like the word "Relief" if it means permanent never-to-come-back elimination.)
What about county (not school) property taxes?
Our plan does not address municipal/county property taxes. Why?
- The amount of tax revenue generated is much smaller (about 30% of proeprty taxes statewide)
- The rate they rise is much slower
BUT, we do think our plan is a good blueprint on how to eliminate those county taxes.
(Or, stated a different way... after we eliminate the egregious school property tax, we'll work on our plan to eliminate the municipal/county tax, and eliminate the millions of dollars spent on assessments.)
What are PA's neighbor states' sales tax rates?
(tax rates from taxfoundation.org in Oct 2021)
- Ohio: 7.22% (+ gross receipts tax, clothing fully taxed)
- New York: 8.52% (clothing taxed above $110, 4th highest property tax in USA)
- New Jersey: 6.6% (2nd highest property taxes in USA)
- Maryland: 6% (clothing fully taxed)
- West Virginia: 6.51% (clothing fully taxed)
- Delaware: 0% + gross receipts tax
How will you keep local control (instead of Harrisburg)?
- The Sales tax will be collected and sent to a fund locally
- The Income tax will be collected and sent locally
This LOCAL tax is dedicated for schooling, and is intended to alleviate fears that Harrisburg would mis-use the funds intended for shcools.
What about very low income residents?Income tax: PA Tax forgiveness can reduce (or eliminate) all of your income tax.Examples of 100% tax forgiveness thresholds:
Sales Tax: If you spend mostly on WIC/SNAP food items, these items are not taxed. (non-WIC/SNAP are taxed at only 2%)
- $8,750 (single)
- $15,250 (married)
- $22,500 (married + 1 child)
- $32,000 (married + 2 children)
- $41,500 (married + 4 children)
- $51,000 (married + 5 children)
What about the Equitable Funding Lawsuit?
The equitable funding lawsuit (2021-2022) relates to the disparity in education funding across PA. It illustrates that some areas of PA receive more state support, and others receive less state support (driving up property taxes.
If the PA Court system rules that the state must provide a different funding method for schools, our plan likely would meet the criteria through the local sales/income tax.