by Lowman S. Henry | February 15, 2005

‘Commonwealth Caucus’ has solution to state’s property tax woes

Property tax reform is the Holy Grail of efforts to restructure Pennsylvania’s antiquated and unfair system of securing revenue for school districts, counties, and municipalities. Despite the burden the current system places on a wide segment of our population – everyone from young families to senior citizens suffer – no meaningful reform has been forthcoming from Harrisburg .

Supporters of Governor Ed Rendell’s ill-conceived slots law will argue that property tax relief is in the works. They still believe tax revenue from expanded gambling will provide property owners with a meaningful drop in property taxes. But, the evidence is mounting that taxpayers will see little, if any relief from gambling tax revenues.

The state’s new gaming panel is already hard at work awarding itself high salaries and perks such as free cars. The Pennsylvania School Boards Association, a group you might think would be on the side of taxpayers, is headed to court in an effort to gut provisions of the new law, officially known as Act 72, that would limit tax increases and require major tax hikes be submitted to voter approval via referendum.

Add to that the fact school districts are free to raise taxes to whatever level they deem necessary between now and the time Act 72 limitations takes effect, and, well the whole exercise pretty much leaves taxpayers again holding the bag. Even Rendell is saying it will be 2007 at the earliest before any gambling tax revenue will flow to school districts. By then most districts will have raised taxes more than the cuts to be funded by gambling proceeds. And none of this addresses tax reform for counties and municipalities.

But all is not lost. An intrepid group of legislators known collectively as the Commonwealth Caucus have been working for several years on an innovative plan that would totally eliminate all property taxes. Lead by State Representative Sam Rohrer (R-Berks), these legislators have been fine-tuning their plan by reaching out to a wide array of stakeholder groups and employing the numbers crunchers needed to make sure the plan will work.

Recently reintroduced as the “Plan for Pennsylvania ’s Future,” the Commonwealth Caucus tax reform measure truly unshackles taxpayers from the current system with real and meaningful change. Simply put, school property taxes are eliminated. Further, the state’s 6% sales tax is reduced to 5%. The revenue lost by these cuts would be made up by expanding the sales tax to cover goods and services not currently taxed. Food, clothing, and professional services such as legal and architectural fees that are now exempt would fall into the latter category. This would generate an additional $16-$17 billion each year.

The result would be a simplified system that would be more fair and equitable. Sales taxes are largely imposed on discretionary spending, whereas property taxes are levied against our homes not only at the time of purchase, but for as long as we own them.

hile any tax reform proposal is ultimately a tax shifting proposal, through sheer persistence and the willingness to put aside the typical legislative proclivity to act incrementally rather than in bold strokes, Representative Rohrer and the Commonwealth Caucus have hit upon a workable, politically viable solution to the state’s property tax dilemma. The question now is whether legislative leaders and the governor are ready to give the Holy Grail a chance.