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Property Tax Elimination: Step 1

Pennsylvanians will have an opportunity to express their opinion when voting on November 7th.  The question is whether the PA should revise its laws to begin the process of reducing or eliminating property taxes. The ballot question should read:

“Shall the Pennsylvania Constitution be amended to permit the General Assembly to enact legislation authorizing local taxing authorities to exclude from taxation up to 100 percent of the assessed value of each homestead property within a local taxing jurisdiction, rather than limit the exclusion to one-half of the median assessed value of all homestead property, which is the existing law?”

Even with approval, this would have no immediate effect on taxes. Rather, it begins the discussion of how to fund PA school districts. Elimination or reductions in property taxes mean the money needs to be ‘found’ somewhere else. When tax burdens are shifted, there is much debate – and it focuses on winners and losers. In other words, who would gain and who would lose from such a dramatic change?

There are valid arguments on both sides, but the prevalent thought across the state would be to replace the property taxes with a combination of an increase in the state sales tax and earned income tax. The main concern of those in charge is that this new funding would shift school funding from fixed to variable sourced. The dollars generated would no longer be automatic, but rather tied to what Pennsylvanians earn and what is spent within our borders.

It is the opinion of this author to move forward with this process. I believe that total property tax elimination will not occur, but rather a hybrid taxation system, which takes into consideration private versus commercial properties, primary versus secondary home ownership, and the land component found in farming and Pennsylvania industries.

Flat percentage taxes are much easier to administer and would remove the subjective process of assessing homes within neighborhoods and across municipal and county lines. Simple is better and simple is needed to fix a fundamentally broken system in order to attract new businesses and retain the talent we create through our extraordinary educational systems.

Mark Schuster

October 23, 2017

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