Lawmakers need to change tax system now
State lawmakers, for many decades, steadfastly have avoided fixing the obsolete local property tax system. Even though the system is destructive of the areas they represent, they know that they would have to raise state taxes to supplant the local revenue that would be lost through true property tax reform; better to leave politically risky tax increases to local governments.
As lawmakers have dithered, the destructive impact of school property taxation has grown.
According to the state Independent Fiscal Office, the state's 500 school districts alone collected more than $11.1 billion in property taxes during the 2010-2011 school year - a 6 percent increase over the previous year and a five-fold increase from 20 years ago.
But it's not just about the money. It's about school and local municipal governance.
Forcing school districts to rely so heavily on local property taxes contributes to vast disparities in the quality of education across the state because districts with limited tax bases inevitably have limited resources.
And, because school districts consume a far higher percentage of property taxes than local governments that rely on the same tax base, property taxation is a fundamental driver of the stress being experienced by so many municipal governments statewide.
Last year it appeared that lawmakers would get serious about property tax reform. Unfortunately, a bill to eliminate the school property tax and replace the revenue with a mix of state taxes ultimately failed.
The Legislature did empanel a Select Committee on Property Tax Reform, however, and last week it made a series of recommendations for property tax reform. Many of those proposals are peripheral, minor matters, what one lawmaker called "low-hanging fruit."
One proposal, however, could lead to the ultimate modernization of local taxation in Pennsylvania. It calls for a state constitutional amendment allowing local governments and school districts to exempt local "farms and homesteads" from up to 100 percent of the property tax, while allowing those governments to devise other mixes of local taxes to cover the revenue.
Even that is only a partial answer, however. The bigger question for state lawmakers is whether they intend to take responsibility for the antiquated, regressive state of local property taxation. That, in turn, requires leadership and assumption of political risk at the state level. Regarding property taxation, that is overdue by at least 40 years.