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A new study contends the current plan in Harrisburg to eliminate school property taxes would actually end up costing most middle class families more in taxes. The Keystone Research Center report estimates total taxes paid by families statewide would, on average increase by $334.
The plan is to replace local school property taxes by increasing the state sales and income taxes. But the report argued that would reduce taxes paid by corporations by eliminating their property taxes, forcing working class families to pay more to fund schools — even without increasing the amount of money spent on public education.
“While property taxes would fall by an average of $1,685 per family,” the report said, “sales and income taxes would rise by over $2,000 on average per family.
Families earning between $22,000 and $40,000 would see the biggest tax increase when viewed as percentage of income: 0.9 percent. Families earning between $215,000 and $535,000 would have the smallest increase in relation to income: 0.1 percent.
The law takes the new money from increased sales and income taxes and uses most of it to replace money currently being raised in property taxes by each district. The report contends that, as a result, “the largest amounts of property tax relief would go to affluent families in rich school districts that have the highest property taxes because those school districts choose to amply fund local schools.”
That means “in the 125 most affluent (lowest-poverty) school districts as a group, school districts would receive $10,703 per student in property tax relief, nearly three times as much as the $3,721 on average in the 125 highest-poverty school districts.”
A 2015 bipartisan law adopted a new formula to distribute state money for education. It is intended to base distribution on need, but it only applies to any “new money” authorized in for the education budget. That leaves most of the money distributed without using the formula.
If property taxes were eliminated and the same amount of money redistributed by the state using the new formula, the amounts districts get would be dramatically different.
To demonstrate, the report looked at total money raised through property taxes by all 500 school districts in 2014-15: $12.3 billion.
It compared how much of that money each district actually got, and how much each would get if the total had been redistributed statewide using the new formula — roughly the equivalent of what will happen if the law is passed as written, and what would happen if it was changed to distribute money through the formula.
Generally, wealthier districts would lose money and poorer ones would get more.
For example, in Luzerne County Dallas School District raised nearly $18.8 million in property taxes in 2014-15, but would get only $7.5 million in the theoretical redistribution. Hazleton Area, on the other hand, raised almost $38 million in property taxes, but would get $91.8 million from the redistribution.
“While failing to address the most pressing education finance issues in the commonwealth,” the report argues, “property tax elimination also raises taxes for most Pennsylvania families.”