Property Taxes

Issue Spotlight: Property Tax Reform

Legislative proposals to eliminate property taxes in Pennsylvania have gained steam in the Legislature, posing a serious threat to stable, predictable education funding. Most of the proposals currently before the General Assembly do not address the primary issue with property taxes in Pennsylvania — that too few state dollars are used to support public schools in the commonwealth. Pennsylvania can help seniors and working families having trouble paying their property taxes with better targeted strategies while still protecting critical investments in public education.

In his budget address, Governor Wolf observed that Pennsylvania faces a choice of two paths. Taking one path would require us to deal with the reality of our structural deficit and raise revenues to close it. It would enable government to continue to meet its responsibilities to educate our children, serve those who need our help, protect the environment and encourage economic growth. Taking the other path would require us to accept devastating cuts to education and health and human services.

With ongoing negotiations over the state budget focused on property tax cuts, and the State Senate taking up a bill to eliminate property taxes, this briefing paper compares property tax elimination with two more targeted approaches that would reduce, but not eliminate property taxes: the Republican proposal that passed the Pennsylvania House in May (House Bill 504) and Gov. Wolf’s original proposal from March.

We find that property tax elimination would raise taxes on the middle class to give wealthy homeowners and businesses in wealthy communities a tax break. Both targeted approaches would be better for the middle class, but the Wolf proposal would be the best for moderate-income homeowners and would also cut non-residential property taxes the most in lower-income communities, a potential boost to community revitalization.

Gov. Wolf and legislative leaders are currently negotiating over the terms of a plan to cut property taxes which would be financed by an increase in the state sales tax rate from 6% to 7.25%. This brief analyzes the size of the sales tax rate increase by income. It also compares that impact to how much different income groups would pay with an increase in the state personal income tax rate from 3.07% to 3.57%, as proposed by Gov. Wolf in October and rejected by the Republican legislative majority and nine Western Pennsylvania Democrats.

On Tuesday, November 10th, Governor Wolf and legislative leaders announced a budget framework for 2015-16.  While an agreement could be good news, some key issues have not been addressed.

This brief looks at the different ways property tax relief can be structured in Pennsylvania and why for lower- and middle-income homeowners, homestead relief provides more bang for the buck than millage rate cuts.

Gov. Tom Wolf presented his 2015-16 State Budget Proposal on March 3.  The Pennsylvania Budget and Policy Center will be posting analysis, infographics and related documents on this page as they become available. Check back often for the latest updates.

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