Eliminating Property Taxes Raises Taxes on Middle Class to Cut Taxes on Affluent

Eliminating Property Taxes Raises Taxes on Middle Class to Cut Taxes on Affluent

New PBPC Brief Finds That Targeted Property Tax Cuts a Better Approach

Ellen Lyon, 717-255-7156

Read the brief online here

HARRISBURG, Pa. – Nov. 23, 2015 – The Pennsylvania Senate is expected this week to take up Senate Bill 76, which would eliminate the property taxes used to provide local funding for schools and replace their revenue with a combination of higher sales and income taxes. A new brief from the Pennsylvania Budget and Policy Center, released today, compares the property tax cuts promised by SB 76 to the more targeted property tax cut plan in House Bill 504, which passed the state House of Representatives in May, and the property tax cuts proposed by Gov. Wolf in his original budget plan from March, using data for the relatively low-income Reading School District in Berks County and the relatively affluent Wissahickon School District in Montgomery County. The brief also makes available data for reporters to make similar comparisons for any other set of school districts in the state.

“Our analysis of previous property tax elimination proposals found that they increased average taxes on middle-income families, while lowering average taxes on the top 20 percent of Pennsylvania families,” PBPC Research Director Dr. Mark Price, author of the brief, noted. “There is no way to escape the fact that property tax elimination amounts to large tax cuts for the wealthy and for businesses paid for by the middle class.”

Property Tax Elimination Raises Taxes on Middle Class to Cut Taxes for Affluent recommends that if property tax cuts are going to remain a priority, targeting them would be superior to eliminating property taxes altogether. The report found that:

  • Property tax elimination would raise taxes on the middle class to give wealthy homeowners and businesses in wealthy communities a tax break.
  • HB 504, a Republican proposal, provides more targeted property tax relief that is less generous – but still meaningful – to wealthy homeowners and to businesses in wealthier communities.  
  • Gov. Wolf’s original plan to cut property taxes was much more generous to middle-class homeowners, renters and businesses in lower-income communities.

“We think a majority of voters and lawmakers, if they understood these differences, would oppose property tax elimination: they don’t want to make the Pennsylvania tax system even more unfair, and they don’t want to threaten the adequacy of school funding,” Price said.