Text of the PTCC Address to the Lehigh Valley Agricultural Summit
14 March 2007
Good morning, everyone.
My name is David Baldinger, I’m from Berks County, and I’m the administrator of the Pennsylvania Taxpayers Cyber Coalition, an internet and e-mail based taxpayer advocacy group for those taxpayers who have no local group available to them. The PTCC is a member of the Pennsylvania Coalition of Taxpayer Associations, a twenty-three member coalition of taxpayer support groups from throughout Pennsylvania that represent more than ten thousand Pennsylvania homeowners. Both the PTCC and the PCTA support school property tax elimination and are non-partisan in nature.
Property taxes have been used as a revenue source since the Middle Ages when only the wealthy could afford to own property and were therefore a target for tax levies. This is no longer the situation, and ever-escalating property taxes are making it increasingly difficult for families to afford their homes. In Pennsylvania alone almost ten thousand homeowners are evicted from their homes by sheriff’s sales each year. This is a deplorable situation that must end.
I’ve been asked to speak to you about property tax reform. But before we can discuss true property tax reform, we should take a look at what we have now.
Act 1, the Taxpayer Relief Act, was passed in June 2006. It has four basic provisions.
The first, the expanded property tax/rent rebate program, offers almost nothing more for those enrolled in the original program and, because of their higher incomes, gives only a pittance to newly-covered seniors. Further, it is initially being financed by 200 million dollars BORROWED from the lottery that will need to be repaid later.
The second provision, tax relief from slot machine revenues, is also almost meaningless to homeowners. Most analysts say that the three billion dollars in gross gaming revenues necessary to finance the one billion dollars in promised tax relief is not achievable. The more likely amount, 400 million dollars, will be available only after other obligations like gameland property taxes, jockey pensions and increased racing purses are paid, probably not until 2010 or 2011. That 400 million dollars will give each homeowner in my school district, for example, Governor Mifflin, a paltry $61 per year. This amount is similar for other school districts in Pennsylvania.
The third provision is the backend referendum on tax increases. Not only does this provision hobble school boards in their budgeting process but, because of ten exceptions to this provision, it in no way achieves its stated purpose – a public referendum on spending increases. In Berks County, eight of the sixteen school districts – 50 percent – have already asked the Department of Education for tax increase exceptions above the mandated index, with one district requesting an 8.3 percent increase this year.
The fourth provision of Act 1, and the most egregious, is the May referendum for a partial shift from property taxes to a personal or earned income tax. Ten percent of the local school tax study commissions that were mandated by this law have returned "no recommendation" responses to their school boards after they discovered that this tax shift scheme will, in many instances, result in HIGHER taxes for the average homeowner.
The pool of money that is established when a tax shift referendum is approved remains fixed in each district. New home construction divides this pool of money further each year, resulting in smaller rebates, and rising incomes mean higher taxes. The result is that homeowners will pay more in income taxes each year while the amount of their rebate declines.
As you can see, none of the provisions of Act 1 come close to providing the property tax reform that the Governor and Legislators promised when they passed Act 1.
In short, Act 1 is failed legislation that gives minimal benefits to a very small subset of the population while placing an even greater tax burden on the majority of homeowners and on all renters.
Act 1 has been opposed in editorials in dozens of Pennsylvania newspapers. In fact, the Pottstown Mercury and the Norristown Times-Herald are sponsoring a letter writing campaign in the hope of sending thousands of letters of opposition to the legislature.
And as of today, six courageous Pennsylvania school boards have unanimously approved a resolution to the legislature condemning Act 1 and demanding its repeal. Many more have this resolution on their agenda.
You and every other Pennsylvania voter will be asked to decide on the Act 1 tax shift during a May 15 primary election referendum. The PTCC and the PCTA are working to have this referendum defeated in as many school districts as possible to send a message to the legislature that Act 1 is UNACCEPTABLE to the homeowners of Pennsylvania and must be repealed.
You can see how this referendum will affect your total school tax bill by using the Act 1 tax calculator on the PTCC website at www.ptcc.us.
It is important that your voice is heard on May 15. In a Quinnipiac University poll that was released on February 7, only 11% of those Pennsylvanians polled were familiar with the tax shift referendum scheduled for the May primary election. Yet this uninformed electorate will be forced to vote on a proposal that will affect their financial well-being for many years into the future. Please help to spread the word and be sure to vote on May 15.
Now, let’s talk about REAL property tax reform.
Many of you might remember the property tax reform legislation called the Commonwealth Caucus Plan, also known as the Plan for Pennsylvania’s future, which was debated last year at the same time that Act 1 was passed. This bill was defeated, garnering only 74 votes of the 102 that were needed for passage. I watched the debate closely on PCN and it was a travesty. The Plan for Pennsylvania’s Future could have been the holy grail of property tax reform and it still would not have passed. It was obvious from the start that Act 1, with its gambling revenue related financing, was going to be the only bill that would achieve passage.
It’s unfortunate, because the Plan for Pennsylvania’s Future is the only legislation introduced so far that offers the opportunity for real property tax reform.
It is unlikely that the plan will be re-introduced in its original form during this session. It is, however, VERY likely that a similar bill, using the Plan for Pennsylvania’s Future as a base with some bipartisan modifications, will be introduced shortly.
Since the plan’s basic ideas will probably remain, let’s look at how this legislation will work.
The plan calls for the total elimination of school property taxes, nuisance taxes like per capita and privilege to work taxes, and the local one-half percent earned income tax levied by most school districts.
These taxes would be replaced by three funding sources.
The state sales tax would be expanded to include all purchases except doctor visits, prescription medicine and most healthcare, fresh meats, produce, and dairy, all utilities and heating fuels, and certain business-to-business services.
The second funding source is a one-half percent increase in the state income tax. Since the plan eliminates the local earned income tax, this would be cost neutral for most taxpayers.
Possible additional funding would come from a two percent increase in the real estate transfer tax. For many homebuyers this will also be cost neutral, since a purchaser will no longer have to provide an upfront real estate tax escrow at settlement.
None of these taxes are particularly burdensome by themselves but, taken together, these three taxes would generate the eleven billion dollars necessary to totally replace the property tax to finance Pennsylvania schools.
Further, this plan will more equally distribute the cost of school funding across all of Pennsylvania’s population, rather than just depending on taxing homeowners and, through the expanded sales tax, would capture revenue from the underground economy that is missed by current taxing methods.
Despite the arguments by opponents of the Plan for Pennsylvania’s Future, this legislation has been reviewed by the Department of Revenue and House Appropriations Committee staff which has determined that this proposal raises enough funds to eliminate the identified taxes. In addition, this legislation has been reviewed by two leading economics firms – Fishkind & Associates and Economy.com. Both of these firms independently confirmed that this legislative proposal was not only financially viable, but economically positive.
Under this plan, school districts will receive their funding from the Department of Education on a student per capita basis. All districts, large or small, will receive the same amount of funding per pupil, thus leveling the playing field between wealthier and poorer districts. All students in Pennsylvania, regardless of their location or their area’s economic condition, will have the opportunity for a quality education.
In addition, the Plan for Pennsylvania’s Future completely eliminates the taxing ability of local school boards, forcing them to live within a budget like all of us. The only exception will be for major projects such as new school construction, and all of those will be subject to a taxpayer referendum. Yearly increased funding to each school district will be based on the increase in the cost of living.
The Plan for Pennsylvania's Future is overwhelmingly supported by Pennsylvania voters. Polls conducted by the Keystone Policy Institute and the Lincoln Institute revealed that an overwhelming majority of registered Pennsylvania voters support the Plan for Pennsylvania’s Future. A clear 60% remained supportive of the plan even when informed that the expanded sales tax would include food and clothing as in many other states.
The 100% elimination of school property taxes is a win-win situation for all Pennsylvanians.
Homeowners will benefit from the restoration of true property ownership and unprecedented financial freedom without the economic oppression of rising school property taxes.
Farmers will not have to sell family properties that have been handed down through generations.
Senior citizens will no longer be forced to sell their homes or be evicted from their homes due to school property tax bills that they can no longer afford to pay.
More young couples and renters will benefit from the prospect of qualifying for home ownership because of no school tax escrow and, thus, lower monthly housing payments.
The Plan for Pennsylvania’s Future is the most comprehensive property tax reform plan to be offered.
In closing, I’d like to ask two things of all of you.
First, become informed about the May 15 referendum so you can make an intelligent decision when going to the polls – and PLEASE, go to the polls and vote.
Second, when legislation based on the Plan for Pennsylvania’s Future is introduced, please give it your full support. Grassroots politics does work when the voices of concerned people are heard. YOU can help to achieve REAL property tax reform for all Pennsylvanians.
Please visit the PTCC website at www.ptcc.us to learn more about these issues.
I’ll be here through lunch if you have any questions and if you would like to leave your e-mail address to receive future PTCC updates.
Thank you for listening.