Sales tax increase is not reform, it is a tax hike
Governor Ed Rendell is proposing to hike Pennsylvania’s sales tax from 6% to 7% in part, he says, to help fund property tax relief.
It is going to be a tough sale.
Pennsylvania taxpayers have been crying out for significant property tax reform and relief for decades. Governor Rendell promised to end property taxes as we know them during his first term, a promise he failed to keep. We were told that if slot machine casinos were legalized the resulting tax windfall would significantly reduce if not eliminate property taxes for most Pennsylvanians.
Except for a relatively small number of low income senior citizens, few property tax payers have seen any relief as a result of slots tax revenue. A recent statewide poll on gambling-related issues conducted by the Lincoln Institute of Public Opinion Research found the general public harbors little hope of seeing their property taxes significantly reduced.
According to results of the poll, 47% of Pennsylvanians say they do not expect to see their property taxes reduced at all, while 35% expect to see their taxes somewhat reduced. Significant property tax relief is anticipated by 7% of Pennsylvanians and only 3% expect to see their property taxes totally eliminated as a result of slot machine gambling having been legalized.
Public mistrust of government to deliver property tax relief with gambling tax proceeds runs strong and deep. During a Public Opinion Court focus group session the Lincoln Institute conducted on this issue, participants actually said they feared state government involvement in gambling more than that of organized crime.
A sizeable portion of the electorate feels Rendell and the proponents of gambling sold them a bill of goods. Forty-five percent of those who said they supported the legalization of slot machine gambling said the promise of reduced property taxes influenced that decision. Clearly the yearning for property tax relief was a significant political factor in the ability of pro-gambling interests to finally achieve their long sought goal of legalizing slots casinos.
It worked once, so now Ed Rendell is attempting to sell another tax by dangling the property tax relief carrot before taxpayers. The Rendell plan to raise the sales tax to 7% sounds eerily familiar. Like the revenue generated from taxes on slot machine gambling, the governor plans to use only a portion of the funds the sales tax increase would generate for property tax relief. In fact only a third of the new tax dollars would go to mitigate property taxes, the remaining two-thirds will go to help fund the big government spending programs contained within his 2007-08 budget.
Thus, property owners again will see little, if any, property tax relief if the sales tax is raised. Worse, school districts across the state have been raising taxes in some cases at three to five times the rate of inflation, thus taxes have already gone up far in excess of any relief likely to be generated by Rendell’s latest property tax reform plan.
Using state sales tax revenue to provide property tax relief is not an inherently bad idea. State Representative Sam Rohrer (R-Berks) and a group of conservatives in the state House have been advocating a plan that would actually reduce the sales tax to 5% but apply it to a wider ranges of goods and services. The resultant increase in revenue would be 100% dedicated to property tax relief.
The big difference is that the Rohrer plan would result in a dollar for dollar reduction in property taxes, making it a true tax shift. The Rendell plan would provide little actual tax relief while expanding state government spending, making it a true tax hike.
None of this, however, is real tax reform. Real tax reform would strike at the cause of the problem which is out of control spending by school districts across Pennsylvania. It is bad enough that tax shifting is being portrayed as tax reform, but the Rendell sales tax increase is even worse – it is a tax hike being billed as tax reform. As such, it is a Trojan horse than ought not to be allowed inside the gates.