A comprehensive plan to reform and reduce our state's dependency on residential property taxes and to ensure homeowners are free from the worry that they will be taxed out of their homes.
It's no mystery that Pennsylvania's system of funding public education through property taxes places an unreasonable burden on homeowners. For years Pennsylvania politicians have talked about providing homeowners with property tax relief, but it seems like real results have been hard to come by. Tony believes it's time to inject some new, innovative ideas into the mix. We're never going to get the change we want if we keep on relying on the same old politics.
According to the Tax Foundation, a national advocacy organization, Pennsylvania's taxes on owner-occupied homes is the 11th highest in the nation, with an average rate of 1.34% of the home value. As a result, some homeowners are reasonably concerned that they will be unable to keep their homes because property taxes will become an unaffordable cost. That is unacceptable.
As governor, Tony's priority will be to reduce Pennsylvania's dependency on residential property taxes for local school districts by embracing new, outside the box ideas. Tony will identify dedicated sources of revenue to direct to local school districts in order to off-set or eliminate local property taxes. He will also fight to reform the manner in which property values are assessed, school districts adopt budgets, and education costs are controlled, all of which will help reduce the property tax burden on homeowners
The following is an outline of Tony's comprehensive plan to reform and reduce our state's dependency on residential property taxes and to ensure every homeowner is free from the worry that they will be taxed out of their homes.
Reducing Local Property Taxes
- Use state gaming dollars to reduce local property taxes by 33 percent. Increasing property taxes on working families is simply no longer an option. Accordingly, it is necessary to find new sources of revenue to direct to local school districts to off -set and reduce the reliance on residential property taxes. As governor, Tony will comprehensively link all revenue derived from various gaming activities and direct it to a new initiative intended to substantially reduce local school district reliance on residential property taxes. For example, he would authorize Keno gaming, a type of number lottery in local bars and taverns. This would raise approximately $60 million each year. In addition, Tony would support the passage of legislation currently pending in the General Assembly that would legalize the expansion of "small games of chance" in bars and taverns to raise an additional $120 million. Coupled with redirecting table gaming revenue, which would produce approximately another $160 million. These three new sources of revenue would produce over $340 million, which could be added to the current $1 billion in slots revenue that is expected to be produced once casino gaming is fully established in the Commonwealth. Combined, this would create a dedicated revenue stream of approximately $1.4 billion to off-set local property tax bills.
Total residential property tax collection from local school districts is approximately $4.3 billion. The $1.4 billion in new, dedicated gaming revenue, coupled with savings derived from his school choice initiative and new controls on public school spending, would provide real and substantial savings to residential homeowners in Pennsylvania, reducing their property tax burden by at least 33 percent.
- Direct additional savings and new tax revenue for targeted property tax relief. In an effort to completely eliminate school district property taxes for elderly, fixed-income residents, Tony would direct further state resources to local school districts, targeted at completely eliminating the tax burden on elderly homeowners. Savings derived from prison/sentencing reform, more effective tax collections, elimination of wasteful and inefficient state programs, elimination of legislative reserve accounts, and new revenue sources, such as taxing smokeless tobacco ($53 million) and imposing an additional 20 cent per pack on cigarette sales ($91 million) would raise enough revenue to eliminate school district taxes for elderly homeowners with a fixed income.
Controlling Education Costs
- Prohibit any local property tax increase if the local school district's general fund budgetary reserve exceeds 5% of the total budget. According to data from the Pennsylvania Department of Education, at the end of the 2007-08 academic year, school districts across the Commonwealth have a combined $2.4 billion in general fund reserves. Depending on the school district, these reserves can be substantial. Increasing the tax burden on homeowners should always be the last resort. Budget reserves should be used before any increase is permitted.
- Closing Act 1 Back-End Referendum Loopholes. When it passed Act 1, the General Assembly correctly recognized the need to control local school district costs. If local districts seek to expand their annual budget beyond a set percentage, they are required to seek local voter approval. However, certain exceptions to this requirement were put into the legislation permitting school districts to avoid the referendum requirement, or in some cases reversing a referendum vote if the state Department of Education approved an exception. These loopholes should be closed in an effort to place greater cost controls over local school district expenditures.
- Limiting future cost-of-living increases for public pensions and increasing the vesting period for new public school employees. Pennsylvania is facing a significant unfunded public school pension liability that could exceed $5 billion in 2015, with a local school district contribution rate spike of 20.1% to occur in 2011-2012. While there needs to be a comprehensive resolution to this problem, we can address some issues immediately. For example, we need to limit future cost-of-living increases to the defined pension benefit plan. These increases have added to the pension fund's cost liability. In the future, Harrisburg needs to be more circumspect about increasing pension costs. In addition, in 2001 and 2002 Pennsylvania made it easier for employees to become vested in the retirement system, reducing the employment vesting period from 10 years to 5. Reforms need to be made to the pension system that recognize the limited resources of the Commonwealth. Future COLAs must be curtailed and the vesting period should be restored to 10 years.
Reforming the Property Tax Collection System
- Mandate that local property taxing authorities provide homeowners the option of paying their tax bill in monthly installments. Many homeowners who have paid off their mortgage and retired do not have the lump sum available to pay a $3,000.00 property tax bill in one installment. Like any other large debt, homeowners should be provided the ability to pay their taxes on a more manageable basis.
- Require regular property reassessments to be conducted on a statewide, uniform non-discriminatory basis. Like any tax, property taxes should be fair. This means that tax assessments should accurately reflect the true value of the property at the time it is taxed, not 10 or 20 years ago. Property values go up and down, a homeowner whose property value has dropped should not pay a tax that reflects a higher property value. Requiring a regular and set property value reassessment that uses a uniform and predictable method is both fair and more effective in creating a dependable and predictable revenue stream for public education. Property values should be reassessed no less than once every 6 years.
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