A new property tax plan that would eliminate school property taxes for 2 million homeowners, reduce property taxes by $1,990 for another 1.2 million homesteads and provide a $500 rent rebate for more than 800,000 Pennsylvanians was unveiled Wednesday by Senate Democrats.
Under the PA Home Rebate plan, property taxpayers would be eligible for a 100 percent rebate of their school property tax bills up to $1,990 while renters would receive rebates of $500 provided their income is less than $50,000. The rebates would be available annually.
“The plan is simple, straightforward and substantial,” Sen. Jay Costa (D-Allegheny), the Senate Democratic leader said. “It eliminates school property taxes for 2 million homesteads, makes deep cuts for more than a million more and helps renters.
“Seniors, working men and women and virtually all taxpayers and renters benefit from this approach.”
Sen. Costa said the plan drives out more than $4.4 billion in tax and rent relief by shifting the tax burden from a heavy reliance on the property tax to a mix of the Personal Income Tax, Sales and Use Tax and tobacco taxes.
“The plan provides significant tax and rent relief that Pennsylvanians have wanted,” Sen. Vincent J. Hughes, (D-Philadelphia), Minority Chair of the Senate Appropriations Committee, said. “The $1,990 in relief is based on the average property tax bill in Pennsylvania.
“This is a fresh approach and a departure from the plans on the table because it is not based on a distribution formula and it provides uniformity in relief.”
Gov. Tom Wolf offered a property tax plan as a part of his budget address in March. The House of Representatives advanced their own plan (House Bill 504) which passed the House earlier this year. Each of those efforts include a complex formula to redistribute revenues.
The Independent Fiscal Office studied the Senate Democratic plan and reported its findings in March. In a letter to Senators Costa and Hughes, the IFO indicated that the average property tax bill In Pennsylvania was $1,990 and the median was $1,608.
“This plan takes an important first step in shifting more funding responsibility for schools to the state and away from the local property taxpayer,” Sen. Lisa Boscola (D-Northampton) said. “While I still support complete elimination of school property taxes, plans like this provide relief to those struggling to pay ever-increasing property taxes.
“Many of us have sought total property tax elimination as our goal, but until that plan can get the necessary votes this is an excellent step forward.”
“For many seniors this is an exceptional approach because it would provide dramatic school property tax relief combined with relief from county or municipal taxes,” Sen. Hughes said.
Senators Costa and Hughes said the Senate Democratic Caucus plan includes protections against sharply escalating school district taxes to further protect taxpayers from spikes in local taxes.
Because the plan provides a 100 percent rebate up to $1,990, taxpayers will be inoculated from future school district property tax increases until their tax bill reaches that threshold. In addition, current Act 1 spending caps, which require voter approval of spending above an inflation index, would remain in place. The amount that school districts could keep in reserve would be capped at four percent.
Finally, once Act 120 pension increases plateau and the school funding gap created by Gov. Tom Corbett’s drastic cuts in school funding is filled, school districts will not have to repeatedly raise local taxes to cover costs, they said.
Other elements of the plan include making the relief available as soon as possible via a Short Term Investment Program loan from the state Treasury. Taxpayers would be able to receive the rebate of up to $1,990 by check once they submit documentation that they paid their taxes.
The process would be similar to the one that is used to process the rebates for senior citizens under the Property Tax Rent Rebate program, the Democrats said.
Sen. Hughes said the plan allows Philadelphia to fashion its own tax relief scheme because it uses a significantly different tax menu to fund its schools.
He said the plan allows flexibility for Philadelphia to lower a combination of taxes. The city currently uses a combination of a high wage tax, cigarette tax revenues, local sales tax and property taxes while most other school districts balance their books using local property tax revenues.
The proposed tax mix that generates the $4.4 billion to pay for the rebates uses a .78 increase in the Personal Income Tax, a 0.6 increase in the Sales and Use Tax and new levies on cigarettes and other tobacco products.
Senators Costa and Hughes both noted that the levies in the Senate Democratic plan are similar to or lower than both the tax menu presented in House Bill 504 and the Governor’s proposal.The Senators said that they are open to discussing the proper mix of revenues to fund significant property tax relief for all Pennsylvanians.