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WILKES-BARRE — State Rep. Eddie Day Pashinski said he would like to eliminate everyone’s property taxes, however, he said the question is how to do it and where do you find $14 billion to replace that amount.
Ever a hot-button topic locally as well as across Pennsylvania, property tax elimination or reduction is sure to be lobbied this year by taxpayer groups, especially those whose members champion House/Senate Bill 76, which would eliminate school property taxes and replace revenue via an expanded and increased sales tax and an increased personal income tax (PIT).
Pashinski, D-Wilkes-Barre, said his concerns are based on the reports presented by The Independent Fiscal Office and the Department of Revenue, both highly respected financial entities that are utilized by the state and its agencies to complete financial evaluations and present financial reports based on the proposal.
“No matter how you add up the numbers, there are serious problems with HB76, which is why this bill and all the variations of this bill never passed into law,” Pashinski said. “Complete elimination of property taxes seem highly unlikely. However, property tax reduction is very possible and several proposals have been presented that will balance out our tax structure to smooth out the effect of reducing property taxes.”
Sen. David Argall, R-Schuylkill, has said he will introduce the proposal to increase the income tax rate by 60 percent and hike the state sales tax rate by 17 percent, while applying it to a wider range of goods and services, such as groceries, clothing, basic TV, and funeral services.
Argall said it would allow the collection of school property taxes only to retire current debt, would give districts an inflationary aid increase annually and would require voter approval for school boards seeking a local income tax increase.
Why won’t it work?
Pashinski said the two agencies — IFO and Revenue — ran the numbers and reported the results, and their reports have concluded the following:
• Since HB76 is based on raising the $14 billion by raising the sales tax from 6 percent to 7 percent and expanding the tax to most if not all other items and raising the PIT from 3.07 percent to 4. 75 percent or more, a Reserve Fund must be established to be used when and if sales dropped or unemployment increased.
“This fund needs to be approximately $1 billion to $3 billion dollars, and that reserve fund will be paid for by additional tax increases until the fund is established,” Pashinski said.
• At last report, out of 500 School Districts, only eight were debt-free. So taxpayers in all but those eight districts would have sales and personal income tax increases and still have to pay their school property taxes until their school district was debt-free.
“Many school districts have completed major improvements, are in the middle of their building project or have contracted and are in the process of the building plan,” Pashinski said. “The people in these districts would be paying far more than ever before, incredibly more.”
• Philadelphia’s sales tax is 8 percent and HB76 would increase it to 9 percent, “chasing every New Jersey customer back to Jersey and sending Philadelphia residents to Jersey because products in New Jersey would be less expensive,” Pashinski asserts, adding the same would happen in Pittsburgh, where the sales tax is now 7 percent.
“Neither Philly nor Pittsburgh want this additional tax and it must be noted those two cities contribute 40 percent of all the tax revenue collected in our state,” Pashinski said. “That would be a tremendous loss of revenue for our state treasury.”
• Many business, including many large businesses and many in the shale industry that are registered as LLCs or S-Corps, pay 3.07 percent tax now. If HB76 passed as presented, countless businesses would have to pay 4.75 percent-plus, which equates to more than a 50 percent increase in their taxes.
“Needless to say, they are not in support either,” Pashinski said.
Pashinski said when new sources of income are realized by the state, those dollars can then be added and used to reduce property taxes even further. He noted that Gov. Tom Wolf proposed cutting property taxes in half by adjusting the sales tax to 6.5 percent with some expansion and increasing the PIT from 3.07 percent to 3.57 percent.
“But that bill failed to garner sufficient support, especially from the HB76 supporters because they demanded complete elimination or nothing,” Pashinski said. “You can’t just say you are for tax elimination or say you are against it — this issue is too complex. We are always trying to find ways to cut where possible and find new sources to help with the ever-increasing costs associated with our daily lives.”