Since being elected to the Pennsylvania Senate in 2019, I have heard from voters on issues that span the gamut of all areas of state government. Their feelings on one particular issue were very clear: the school property tax is the most hated tax in Pennsylvania (the gas tax being close behind).
Property tax is like paying rent to the government for the land you own. It’s easy to see why this antiquated tax is so despised in all corners of the Commonwealth. More than 10,000 homes are seized each year in Pennsylvania and sold at auction for non-payment of tax. It is particularly troubling that most home crises involve our elderly. Many of our retirees on fixed incomes face the difficult choice of paying for food, medicine, or paying taxes. It is simply unacceptable.
Property taxes also hamper homeowners who aspire to the autonomy needed to expand their property.
The way the tax works is that a government entity assesses a price for each property owned. As a home expands or improves, this rating increases. Not only are homeowners shackled by this, but it also impacts local businesses who would otherwise benefit from the sale of materials and goods for their home expansion.
When he was introduced by referendum vote in 2017, the people made their voices heard loud and clear. By a vote of 54% to 46%, voters statewide supported amending the Constitution to allow for the complete elimination of property taxes for homeowners.
Property tax rates vary depending on the locality or county where a home is located. For example, Chester County has one of the highest average annual tax rates at $4,192, while the average in Philadelphia is $1,236.
If we look at the median home value in Pennsylvania ($164,700) and the average rate (1.3%), the average Pennsylvania homeowner pays more than $2,200 per year, according to Taxrates.org.
A property tax of a few thousand dollars on top of a monthly mortgage payment hurts people looking to maintain a home, especially when they’re on a fixed income or living paycheck to paycheck. . Homeownership in Pennsylvania has risen from a high of 75% in 1999 to 70% in 2020.
The common defense of those who want to keep the property tax in place is that our state “cannot afford it” without drastically affecting the quality of education.
I counter that we can make property tax elimination a reality with a little “outside the box” thinking.
For starters, we need to rethink the way we fund education. By redirecting our public funds to track students rather than systems, we will not only expand the choice of where parents can send their children to school, but we will also save money. Currently, Pennsylvania spends more than $19,000 per student each school year according to Department of Education statistics for 2019-20. We are spending more than ever on education, but we are not seeing better results in academic performance.
Meanwhile, spending per student is around $15,000 for charter schools, and the average cost of private school tuition is $11,800 per year.
Implementing programs such as Education Opportunity Accounts (EOA) would provide families with direct access to educational resources. Individual school districts would no longer receive the state’s average per-student school grant for children who participate in the EOA program. Instead, the funds would be redirected to the child’s education opportunity account administered by the state treasurer and regularly audited by the state. With better accountability and increased competition for students between schools, Pennsylvania can actually save money on education expenses while improving its quality.
Eliminating the property tax will translate into benefits in other sectors of our economy.
The average tax savings from eliminating property tax for all properties would have the same effect as annual stimulus checks for a household. In April 2020, households with two adults and an income below $150,000 received an average of $2,400 ($500 more for each dependent child).
According to Forbes, 75% of these households spent their checks on household expenses to stimulate the economy. I think we would see a similar percentage distribution of expenses with the elimination of property tax and annual tax savings of over $2,000 for the average household.
Increased consumer spending in our Commonwealth increases GDP. Businesses thrive and consumer sales increase with increased demand. This growth ultimately leads to more annual money in the coffers of the General Assembly’s general fund available for education expenditures.
We can also explore income alternatives that don’t hurt the wallets of ordinary Pennsylvanians.
Many of our private public universities are sitting on billions in untaxed endowments. University endowments consist of money or other financial assets that are donated to academic institutions. Our state’s largest, Penn, has an endowment of more than $20 billion after a 41% return on investments in 2021.
According to the American Council on Education, only a tiny percentage of college endowment funds are spent each year, and less than half of those small expenditures go toward tuition reduction and scholarships.
Taxing endowments on wealthy private colleges in Pennsylvania would be a major annual revenue generator for the General Assembly’s general fund.
Another untapped source of revenue is a fee on international remittances sent by a licensee or money transfer agent. An international money transfer is an amount of money that is sent electronically from the Pennsylvania economy to the economies of international destinations. Remittances are primarily used by illegal immigrants, foreign workers, and non-US citizens to send their earnings back to a foreign country. More than 70 billion dollars are transferred each year from the United States to the economies of the recipient countries.
Given the esteemed foreign labor in Pennsylvania, even a modest fee would generate significant annual revenue for the state.
We must also seek to control our current expenditure. I believe that a thorough examination of the 33 state government agencies will reveal significant waste and redundancy. Cutting the fat from these agencies will pay dividends for Pennsylvania in the long run, reduce the cost of our state government, and reduce burdensome regulations. Better management of Harrisburg’s already exorbitant expenses is key to knowing how to afford the elimination of the property tax.
As I said, complete elimination is realistic and fiscally responsible. We just need the determination in Harrisburg to find ways to make it happen.
In late 2019, I joined the Senate Majority Policy Committee Task Force on the Elimination of the Property Tax. Unfortunately, this working group ended with the emergence of COVID-19 in 2020. I support the restart of the group and would definitely register as a member.
This session, I got the ball rolling on the beginning of property tax elimination. My bill, SB 619, will exempt households of those who earn $40,000 or less per year, are 65 or older, and have resided in Pennsylvania for at least 10 years. This is not a solution to the property tax problem, but a short-term action to prevent some of our seniors from being evicted from their homes.
The modern model of land taxation has its roots in the 14th and 15th centuries, when feudal obligations were owed to kings or British landlords. British tax assessors used the ownership or occupancy of property to estimate a taxpayer’s ability to pay.
We must not forget that the lamp of liberty was lit right here in Pennsylvania in 1776. In the spirit of our founding fathers who rejected old European laws and customs, we can once again assume our role as the beacon of freedom by eliminating all property taxes. on the owners of our Commonwealth.
Senator Doug Mastriano is a Republican who represents Pennsylvania’s 33rd Senate District.