MONT ALTO — Rep. Paul Schemel (R-90) used a recent town hall at Penn State-Mont Alto to examine House Bill 13: The School Propoerty Tax Elimination Act., with the help of author and Rep. Frank Ryan (R-101).
During the meeting, Ryan explained:
- Pennsylvania has a demographic problem with young, working age adults leaving the state while older retired people are immigrating. This trend, left unattended, could lead to state bankruptcy.
- Bills have been offered and failed in the past by proposing to shift the burden of property taxes from older to younger residents. Such approaches do not help loss of working adults.
- If school districts go bankrupt, their pension obligations are distributed among all other school districts, effectively raising the rate. In similar fashion, bond holders typically have a lien on property taxes and can collect if landlords go bankrupt.
- If nothing is done to eliminate property taxes, those tax bills are expected to double in 17 years, and triple in 25.
The details of the HB 13 plan are covered in more than 300 pages due, in part, to the complexity of the PA Tax Code. The plan would eliminate $16B in property taxes by shifting to increased sales and income taxes:
- Raising the sales and use tax by 2% to 8%
- Applying a 2% sales tax on food and clothing
- Raising the state income tax by 1.85% to 4.92%
All of these increases would be directed to school districts.
Ryan said just as important as the tax shifts are changes in law that would have the overall effect of making school districts behave more like businesses. For example, a district that needs to build would be required to finance depreciation so that capital improvement funds would be available when needed. In addition, there are provisions that would curb unfunded mandates.
In addition, Ryan said there would be benefits for property owners, renters and small businesses. For example, there should be rent reductions as taxes are withdrawn; there would be lower mortgage closing costs and escrow payments; it would act as an incentive for property improvements and would attract both businesses and jobs.
For more details on Ryan’s plan, visit repfrankryan.com. Readers may find a tax calculator to determine the impact of the changes on their taxes at NoProp.Tax/calc.
“Seniors as a whole save 50%, a majority save significantly, and those on Social Security save the most,” Ryan said. The bill has been picking up support in the legislature. He is hopeful of passage so that many structural changes will create a sustainable financial future for schools.
