Jan 3, 2017 4 min read

HARRISBURG – Debate over school property taxes in Pennsylvania is expected to return to the Legislature in 2017.

Senate supporters say the Nov. 8 election provided the necessary votes to eliminate school property taxes entirely and replace them with other revenue streams.

That would mean shifting about $14 billion in taxes from property owners, including businesses, to Pennsylvania consumers and workers through sales and personal income taxes.

An Associated Press analysis of state data found that more than 70 percent of school property taxes were collected by the wealthiest half of school districts in 2014-15.

Sen. David Argall, R-Schuylkill, will introduce the leading proposal, which would 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.

In late 2015, the Senate defeated Argall’s legislation by a 25-24 vote with Lt. Gov. Mike Stack casting the tie-breaker. The vote split both parties and the Pennsylvania School Boards Association opposed it.

But proponents say a pair of incoming Harrisburg-area senators elected in November are replacing two opponents.

“We believe that gets us to the magic number of 26,” Argall said.

Argall said he will reintroduce the bill in the two-year session that began Tuesday. 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.

Argall said he has discussed eliminating school property taxes with Democratic Gov. Tom Wolf’s administration, but “the devil is always going to be in the details.”

Wolf campaigned in 2014 as a proponent of reducing property taxes, in part to narrow the wide disparity between wealthy and poor school districts. The following year, he proposed a $3.2 billion property tax cut designed to provide the most help to higher-poverty, higher-tax school districts, such as Erie, Harrisburg, Johnstown, Reading and Scranton. The plan never got a vote.

The governor hasn’t endorsed a plan to eliminate property taxes. His office said that while Wolf “could support taking steps towards elimination, the details of such a plan are very important, especially how and whether local communities would contribute directly to school funding.”

It is unclear whether Argall’s legislation can pass the House.

A Republican plan the House approved in 2015 was designed to reduce property taxes by about $4 billion. But Democrats said the bill would have helped wealthier, not poorer, districts, and it died in the Senate.

School property tax collections this fiscal year likely will amount to $13 billion to $14 billion.

Argall’s legislation would increase the state’s income tax rate to 4.95 percent, from 3.07 percent. That increase would provide an estimated $5 billion, while someone earning $50,000 a year in taxable income would see their state income taxes go from $1,535 to $2,475.

The remainder needed to make up the difference would come from increasing the state sales tax rate to 7 percent from 6 percent and eliminating exemptions on many transactions, including groceries, clothing and shoes; legal, accounting and financial services; dry cleaning; funeral services; salon services; basic television services; trash pickup; liquor and beer by the drink; non-prescription drugs; and tickets to sporting events, concerts and other events.

An Associated Press analysis of state data found that more than 70 percent of school property taxes were collected by the wealthiest half of school districts in 2014-15, the latest data available.

Of the $12.3 billion collected, nearly $9 billion of that was collected by the 250 school districts that are in the top half of average household income, according to AP’s analysis.

Districts in the bottom half of household income collected an average of less than $4,500 in property taxes per student. School districts in the top half collected nearly $9,000 per student, or twice as much.

The disparity is greater at further ends of the income spectrum. School districts in the bottom 10 percent of household income collected about $3,100 in property taxes per student, while school districts in the top 10 percent collected nearly $13,000 per student, or more than four times as much.