Dept of Revenue: HB 1776 Comes Up $3.2 Billion Short

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Melissa Daniels:

The House Finance Committee on Monday held a second public hearing on House Bill 1776, or the Property Tax Independence Act. The bill, sponsored by state Rep. Jim Cox, R-Berks, aims to achieve the long-discussed goal of eliminating property taxes to fund public schools by creating increases in sales and personal income taxes, as well as the inclusion of previously untaxed goods and services.

But new figures from the state Department of Revenue show a $3.5 billion gap between the estimated $12.5 billion earned by property taxes, and what the new tax structure would raise. In response, Cox said he and bill co-sponsors would consider increasing the personal income tax even further to meet the mark.

My friend Frank Pintabone on the Easton School Board warned me about this, as an earlier version of this bill had the same problem. It’s a big problem, but ultimately not a dealbreaker for me because:

Pennsylvania’s personal income tax rate is just more than 3 percent, the lowest flat tax rate personal income tax in the nation. Cox’s original plan would boost that rate to 4 percent, a nearly 33 percent increase, which, according to estimates from Cox’s office, would bring in $3.46 million annually.

You could raise a lot more money introducing a progressive tax structure to the income tax.

This entry was posted in Budget, Education.

31 Responses to Dept of Revenue: HB 1776 Comes Up $3.2 Billion Short

  1. phillydem says:

    I’m not opposed to a PIT increase, but why not also increase the CIT and close the Delaware loophole? Why should individuals be forced to carry the load of closing whatever financial gap exists with regressive taxes like the flat and sales taxes?

    But, this just goes to show the bill isn’t/wasn’t designed to make school funding faireras its supporters claim. It’s primary purpose is to limit funds and therefore limit, or better – eliminate, raises and benefits for teachers and other school district employees and handcuff district capital expenditures.

  2. Ken says:

    If they ditch the local Earned Income Tax to raise the state personal income tax, I’d favor the change. The EIT is a terrible idea when the state already has a statewide income tax AND local property taxes to fund local governments and schools.

    But PA needs to raise more income, to start, from the carpetbagger gas companies from Texas, Oklahoma, and Arkansas who are charged a pittance in severance tax to destroy our environment by fracking our lands, looting our natural resources, and polluting our lands and water. Corbett and the Republican legislature should look to out-of-state revenue sources first before sacrificing the incomes and welfare of Pennsylvanians.

  3. Jon, I have an FYI on the statement you quoted above. The $3.5 billion shortfall figure was stated by Finance Committee co-chair Phyllis Mundy.

    At the first hearing for HB 1776 Representative Mundy was obviously confused about the plan’s finances and even after having it explained to her she still didn’t grasp it. On Monday she claimed the plan is $3.5 billion, or 28%, underfunded. During the crafting of the legislation I worked very closely with the numbers; I know to a certainty that the finances work exactly as stated and can’t possibly be underfunded by that amount, especially since revenue projections have increased since HB 1776 was introduced. Her assertion is simply not possible, so she apparently is still confused. Unfortunately, her confusion is sending negative impressions about HB 1776.

    Next, in both the piece about the first hearing and again in this one, PA Independent sensationalized the negatives while pretty much ignoring the positives.

    The first piece by Eric Boehm on May 21 was titled “PA property tax elimination plan hits roadblocks.” This was a gross exaggeration that he justified by emphasizing the negative testimony while completely ignoring positive comments from both me and the Pennsylvania Association of Realtors. Even so, it was hardly a “roadblock.” It was negative testimony and nothing more. http://paindependent.com/2012/05/pa-property-tax-elimination-plan-hits-roadblocks/

    In the piece about Monday’s hearing by Melissa Daniels titled “PA politicos eye even higher income taxes if property taxes killed,” Ms. Daniels strongly implies that, based on Rep. Mundy’s statement, the income tax will need to be raised above the target 4.01%. Ms. Daniels stated that the new figures came from the Department of Revenue while, in fact, Representative Mundy said that they were from the Democratic Appropriations Committee staff, not the DOR. That’s a BIG difference.

    Representative Cox did say that if there is a shortfall the income tax would be used to close the gap but also indicated that he doubted the $3.5 billion shortfall figure. His doubt was de-emphasized in the piece.

    Why the negative spin on two occasions from PA Independent about HB 1776? This kind of trash reporting tends to turn people against the plan and causes us to do more damage control. You don’t suppose their location in a suite next to the Commonwealth Foundation, an organization that has never supported this plan, has anything to do with their apparent bias, do you?

    Late Monday evening I received a Google news alert for a PA Independent story titled “Property tax elimination plan still in flux.” From the few lines that were included it was obviously the same story as “PA politicos eye even higher income taxes if property taxes killed,” but with a less provocative title. The story with the “flux” title had been deleted.

    I guess the original title wasn’t negative enough for the powers at PA Independent.

    • phillydem says:

      Good job, Dave, coming here to get those talking points out. I hope you’re being paid well for this.

      BTW, the lastest FandM Keystone Polls shows voters opposed to hikes in income and sales taxes and in favor of taxes on a wider range of tabacco products and shale drillers.

      • Phillydem, please. You seem to have a propensity for assumption.

        I am a volunteer activist on this issue and have been since 2004. I am paid by no one and do not solicit or accept donations (do you see any donation links on the PTCC website?). All expenses, including the website and traveling across the state for meetings on this subject are borne by me personally.

        In a previous post you referred to me as a Tea Partier, another wrong assumption. My involvement in this effort far predates the Tea Party movement and nowhere in my writing will you find any reference to my political leanings. So where did you get this idea?

        I’m really surprised that you didn’t applaud my post. The CF and PA Independent are conservative organizations that dance to the tune of the Governor and General Assembly leadership. I’m calling them out for their tactics, yet you feel that I’m using “talking points?”

        • phillydem says:

          Dave, I will bet dollars to donuts you are a libertarian. I’ll bet you don’t like teachers, their unions or the benefits they receive either.

          You want quality and fair education? Then start advocating for taxes on shale drilling, closing the Delaware Loophole, asking all businesses in the Commonwealth to pay the CIT, and a progressive income tax. That would certainly generate enough revenue to fund schools adequately so
          all our students get the best possible education regardless of their residence.

          I’m waiting…

          • I have no argument with any of the revenue sources you’ve suggested. However, there are three very practical problems with these using sources.

            First, we’d need all of them to generate the $12.7 billion necessary for elimination and the special interests will oppose them as strenuously as possible. We don’t have the luxury of the time it would take to have all of these passed.

            A progressive income tax will require a constitutional amendment. Again, lack of time prohibits this.

            Third, any such changes, especially taxing Marcellus, will cause a feeding frenzy in Harrisburg with everyone trying to grab a piece of the pie. What are the chances that property tax elimination would see any of this funding before the special interests get their share?

            I just can’t overemphasize the urgency of the situation. In 2004 total school property taxes statewide were $8 billion. That total is now $12.7 billion, an increase of almost 40% in just eight years that far outpaces inflation. How long can this continue before the taxpayers are drained and the education funding system collapses?

            As far as your bet concerning my politics, it will have to wait. I am pragmatic and absolutely nonpartisan on this issue and will not prejudice my views by tying them to a particular political philosophy. This has always been my rule and always will be.

      • Jon says:

        Beer taxes are also extremely low…

    • Jon says:

      Maybe we should get yet another estimate from the Independent Fiscal Office.

  4. furnguy says:

    Coming up with enough revenue may be the easy part. Distributing it to districts in a manner that supports educational adequacy is going to be the tough part.

  5. phillydem says:

    Dave,
    First, inflation (http://data.bls.gov/cgi-bin/cpicalc.pl) counts for about 1.75M of the increase. I would say that’s somewhat understated because of the offset in 2008 that accompanied the big drop in oil prices set back the inflation index. Therefore I don’t agree it’s an urgent problem.

    Second, the current law limits property tax increases to the rate of inflation, which is what you cite as a goal on your website. I realize there are exceptions for capital improvements and building, but all districts do have changes to building requirements based on student pop gains and losses.

    Where I live the property taxes are quite cheap due to low assessed value despite fairly high millage rates. And, our last school board that planned a “Taj Mahal” building project was voted out for their refusal to consider other alternatives like rehabiliating a building that had not been updated because, imho, the board wanted the building to deteriorate to the point it was not salvagable to force approval of new construction. All districts have the same ability to hold their school boards accountable.

    That said, I would support property tax reform in the form of standardized assessments and assessment processes. I believe school finance is an issue best solved at the local level and should not be left to the vagaries of the legislature.

  6. Jim Combs says:

    It goes without stating that if the revenue numbers work and the legislation is well written, a large majority of Pennsylvanians will favor school tax elimination. That is especially true if the first elimination of property taxes in the United States may be accomplished without preventing Pennsylvania students from access to a quality education and hurting the economy of Pennsylvania. I would love to see it work. Rep Cox and the PTCC point to the $9.6 billion dollars that would be freed up for spending but don’t mention others are going to be paying “purportedly” the same amount of new taxes. Not a penny is freed up for economic activity. Only the persons paying taxes changes.

    I am a tax attorney and held a CPA license until I made it inactive January 1st. Mr Baldinger calls the bill well “vetted”. I have looked extensively at Rep Cox’s webiste and the PTCC website. I then looked at the wording of HB 1776. I was not able to find any data to support the claims made in the online PTCC documents I have read and Rep Cox’s website. The PTCC website continues to state the organization wants “equal funding” of school districts but supports a bill that has no funding formula. Rep Cox intentionally removed an “equal funding” formula because it was not acceptable to other members of the legislature.

    Mr. Baldinger says the bill is well “vetted”. I disagree. One of the reasons individuals testifying at the House Finance Committee hearings give a general analysis of their concerns are the ambiguity and other problems strewn throughout HB 1776. This post deals with some, but not by any stretch off the imagination, all of ambiguity and problems.

    The PTCC and Rep Cox fail to do more than mention in passing the blank checks HB 1776 gives to local school districts. These provisions were not touched during the May 21st and June 4th House Finance Committee meetings. At the PTCC website, there is no mention of the details of the authorized new local PIT and EIT.

    If Rep Cox or Mr Baldinger respond to this post, kindly cite the sections of HB 1776 or other Pa. law that support your statements. I will do the same.

    I watched and listened to the entire June 4th House Finance Committee meeting. The shortfall estimate of $3.5 billion announced was identified as the Pa. Dept. of Revenue’s estimate. On June 1st I spoke with an aid for the Democratic Appropriations Committee member’s Staff who told me the shortfall, computed favorably to have new taxes equal to the estimated eliminated property tax, to be 3 billion. The only supporters testifying were the Grange, Pa. Farm Bureau, and Mr Baldinger. Rep Cox ignored the testimony of a VP of Boscov’s who stated HB 1776 would adversely effect retail stores and of various persons testifying the cost of compliance would far outweigh any beneficial effects that eliminating an owners property tax would provide. Further, there is no information provided on the number of property owners who would “save” ownership if HB 1776 is enacted. The vast majority of homeowners in particular on “tax sale” lists would lose their homes because of mortgage and other debt even with the $1500 or so guestimate of average tax elimination HB 1776 would provide. It’s Rep Cox’s bill; he should provide data supporting his conclusions.

    If Rep Cox or Mr Baldinger has an analysis that the funding exists, release it and the supporting data. For months before HB 1776 was submitted to the Pa. House, this analysis was mentioned yet the data was not available at or linked to the PTCC website, or Rep Cox’s website. I was unable to find the data despite making an extensive web search for it. Logic suggests if the analysis was accurate, it would be given to all Representatives and the public who believe HB 1776 will underfund schools to gain their support of the bill.

    The revenue estimates are irrelevant in any event. What matters is the amount of new statewide taxes actually paid into the education fund established by the provisions of HB 1776. If there really is confidence that the new taxes will equal the eliminated property taxes, the bill would “guarantee” full funding. No such guarantee is in the bill for the first or any other year it is in effect. [Section 1302 for taxes paid to the Education fund and Section 1303 for disbursements]

    I find it interesting the HB 1776 purported is modeled after the North Dakota constitutional provision to be voted on June 12th. The constitutional amendment, if adopted, directs the North Dakota legislature to determine the nonproperty taxes to be used to offset all of the eliminated property taxes [including property taxes then receivable but uncollected], including gas, oil and other mineral severance taxes. In effect, at the time property taxes are eliminated, there is no replacement revenue available. I find it difficult to believe a more financially irresponsible act could occur concerning the funding of the government subdivision of a state. Further, the proposed amendment would eliminate ALL property taxes in North Dakota, not just the school taxes provided in HB 1776. As of last week, I found power companies have already filed suit in North Dakota to prevent collection of severance taxes on the ground that the constitutional amendment proposed would make ANY tax on real property unconstitutional. The question for HB 1776 – would it prevent any severance tax for gas, oil, and other minerals in the future from being levied? The answer is yes it will.

    HB 1776 was submitted with the same disregard for fiscal responsibility. Section 1303(b) provides the legislature will decide later how disbursements are to be made. The legislature could decide to distribute less than the amount currently stated in 1303(a) for the “base year”. The legislature can reduce other state funding of education. Section 1303(b) creates the risk that school districts will lose their revenue stream from property tax and other taxes before “disbursements” are authorized to be made from the education fund. If that occurs, everyone in Pennsylvania school districts will be paid to the extent that reserve funds “if any” are available and laid off when the reserves are exhausted. Rep Cox knows this potential but ignores it. In fact, he stated it would be incentive for the legislature to reach an agreement. Really!

    I used the calculator linked to the PTCC website to compute the number of taxpayers paying the new statewide sales tax and PIT needed to replace the $9.6 billion dollars of property taxes estimated to be eliminated. Assuming couples with no dependents and $50,000 of Pennsylvania taxable income will pay all the replacement taxes, 15,141,956 couples are needed, each paying an additional $634, to replace the eliminated property taxes. The total current population of Pennsylvania is a little less than 13,000,000. The numbers don’t work. Rep Cox and Mr. Baldinger if you disagree, show your computations, data, and back a “guarantee” of school funding to be added to the bill.

    Even in the first year HB 1776 is to be in effect, how are distributions to be determined if the total new statewide taxes are less than the eliminated property taxes? [Section 1301 (1)]

    Increases in state funding disbursements are limited to [Section 1301 (1) and (2)] the SMALLER OF the CPI for Pa, NJ and Md. or the “INCREASE” in the percentage of statewide sales taxes [but not statewide PIT increases] collected in the prior year. If the new statewide sales taxes decrease in the prior year from that collected in the second prior year the decrease, disbursements will be reduced as I am told Rep Cox has advised one school district.

    Section 1301 defines the “base revenue” for state funding to equal the money “received” by each school district for the fiscal year on the 30th of this month. By definition, property taxes billed but not collected by a school district by June 30th reduces the funding base for the disbursement of statewide replacement taxes in all years after property tax elimination would take effect. For example, if a school district billed $10 million of school taxes but collected only $9 million, its base year amount for future state funding is $9 million.

    The loss of uncollected taxes, the lack of a guarantee needed for statewide revenue presently received from ALL sources, and the political climate assure state funding will be reduced in the coming years. Not to worry, HB 1776 gives school districts a BLANK CHECK to impose a new local PIT or EIT by referendum. A local PIT will tax the “compensation”, interest, dividends, net business profits, net rental, estate and trust, and gambling income of all of the residents of the school district. The EIT would tax all of the “earned income” of the residents of a school district. A referendum is required, but who can doubt that in many school districts the result will be adoption of the new tax. HB 1776 makes any individual or business engaged in a business transaction within the school district a resident. “Residents” of a school district are the taxpayers. [Sect 304] The residents of a school district include any individual who lives within its borders, and ANY business that engages in business for profit with the school district’s borders, including corporations, partnerships and “other associations” [Section 302]

    At the federal level, all US citizens and resident aliens are subject to tax on their worldwide income. Pennsylvania residents are subject to state PIT on their worldwide income. Pennsylvania’s tax code explicitly states nonresidents are taxable on income derived within Pennsylvania only. The definition of resident in HB 1776 creates the potential a school board will determine that each resident of a local school district in Pa is subject to a local PIT on his, her or its WORLDWIDE INCOME. HB 1776 and other Pa law do not limit the local tax to income derived within the school district. For example, Lowes has stores in approximately 81 school districts in Pa. Potentially Lowes be subject to tax on its worldwide income in 81 school districts. For example individuals often work and live in different school districts. Since they receive compensation, they are engaged in a business for profit activity whether an employee or independent contractor. These individuals potentially will pay a local PIT on their compensation to both school districts.

    Since individuals only pay PIT to Pennsylvania, the question will arise how are corporations and other businesses [except sole proprietorships] pay local PIT. HR 1776 does not tell us. Likely, an S corp owner will pay tax at the corporate level on its “PIT” as well as on the indiviudal level. A C Corp, does not report income to Pa on a PIT return. Note that corporations and other businesses will continue to pay all existing taxes on all existing returns, except for school taxes.

    The local school board alone determines the RATE of the local PIT. [Section 304] The local PIT once adopted, would continue until the rate is changed which requires the school board to propose a referendum to do so. [Section 305]

    Section 304(b) expressly provides the school board alone may place a referendum on the ballot to levy or increase the local PIT tax rate. No other entity or person may initial a referendum. No express provisions exist for the school board to lower the rate or end the local PIT.

    Similar provisions exist for the local EIT that school boards are authorized to levy. The most interersting provision of the local EIT is that corporations and other businesses are “residents” subject to local EIT but historically do not receive “compensation” for services performed. How will that work? HB 1776 does not say.

    Mr. Baldinger’s politics are his business and I believe his statement is not a member of the Tea Party.

    I do note that roughly 8 to 10 of the taxpayer groups supporting the PTCC’s position supporting HB 1776 have the word “Patriot” in their name. In reading posts and other online information from other support groups, I would guess a majority at least consider themselves to be Tea Party members. What is absolutely clear, HB 1776 and its supporters PRESUME school districts at this moment and in the past are more than adequately funded and should not receive more revenue unless raised using one of the new blank check local PIT or EIT HR 1776 authorizes school boards to levy.

    The only reason I believe the identity of bill supporters is relevant, is that Tea Party groups believe any property tax is governmental tyranny. I have heard Rep Cox and Mr Baldinger state property taxes are tyranny. If I misheard, one or both should say so and I apologize for my hearing. My opinion is such a belief means the elimination of property taxes is a goal desired regardless of the negative effects on the quality of education and the Pennsylvania economy. That would explain why Rep Cox ignores adverse testimony and calls the opposition “special intersest groups.” If special interest groups are less than a majority of the voters, it equally true supporters are a “special interest group.”

  7. Vision says:

    School ditrict taxes and all property taxes should be eliminated because:
    1) it is unfair and burden only a portions of the of people ( Homeowners)
    2) Home value does not equate cash for the homeowner available from which taxes should be deducted.
    3) School distrit boards across pensylvania must live with reality. There is no guarantie in today life. If the economy goes bad, they have to deal with little money to run the schools. That will push them to eliminate programs not really necessary for good educations. For example : 1) Use alternatively parents of the students at the school district as cross guard for free . 2) Provide no School bus for communities less than 10 miles from schools. With this alone, we help kids to avoid obeisity and save money for healthcare. Why not cut the 12 billions they are receiving now to 6 billions and consolidate the 500 Schools district in 100 School districts?. Why not make parents of the kids to share at least 25% of the cost of the eductations to make them more responsible for their kids as do parents who send their kids to private schools with exception of kids with real disabilities.
    4) The problem is not only paying for the eduction , but also the trends of today world economy. No garanty for anyone including the teachers. If supporting the schools make people broke and homeless, then it is time to change the course and find other source of revenues or live with less.
    5) Finally, Money alone is not going to solve the problem of unsatiated school districts across Pennsylvania. BELIEVE ME; EVEN IF WE GIVE THEM THE ENTIRE BUDGET OF US DEFENSE, it will be just a matter of years to hear from them that they need more funding.
    6) Before pouring money to school districts HB1776 must provide mechanisms to close all of the School districts wasteful addictions and make them live today reality: NO GUARANTY and LIVE BELOW THEIR MEANS.IF THEY CANNOT PAY FOR A PROJECT , THEN THEY SHOULD HUMBLY ACCEPT THE FACT THAT IT IS NOT NECESSARY and live the reality.
    GO GO HB1776. Send your opinions to make it perfect and workable.
    Thnaks.
    Vision

  8. Independent says:

    This bill needs to pass. The fact that people are losing their homes over property taxes is just ridiculous. That should never happen and should be telling everybody, Rep and Dem, that the school tax system can not stay the way that it is. Does that mean that HB 1776 should be passed the way it is written at this moment. Of course not as I’m sure it is one sided and incomplete.

    The problem with our government right now is that nobody wants to work together to get anything done. If the bill is initially created by a republican and you are a democrat you have to be against it. If the bill is initially created by a democrat and you are a republican you have to be against it. Government has become to much about which side “wins” and less about doing what is right for the people. Ok, Democrats, if you don’t like this bill the way that it is currently written, then sit down with the Republicans that crafted this bill and hammer something out that you both can live with and something that is truly the best that it can be for the people of Pennsylvania.

    This is why I hate our current two party system. It’s always more about what side your on, then doing what is right for the people.

    Come on folks! Work together and get this done!

    • phillydem says:

      I’d like to see the statistics on how many people are “losing their homes” soley as a result of property tax increases. Would you like to provide those or a link to where the data can be found?

      • Jon says:

        Seems to me that the worst thing that happens is that people sell their homes and move.

        • phillydem says:

          Jon, I think the people who the property tax are hurting right now aren’t seniors, (because although they may be on a fixed income, I’d guesstimate a very large percentage already have their home paid off), but those people who bought more “house” than they could afford during the housing bubble/boom and now are underwater on their mortage.

          In my area, $1200 yearly property tax roughly equates to a $200,000 fair market value home. That’s $100/mo, hardly outrageous and not likely to force a person out of their home unless they are living on a extremely small fixed income.

          I think the “losing their homes” argument is a canard although I can see an argument to be made about changing how family (not agri-businesses) farms are taxed.

          • Phillydem, I’m not trying to start an argument, I’m just curious because your school tax doesn’t seem typical. In what school district do you live? My home in Berks is assessed at $185,000 with a market value of about $225,000. My school property taxes are $4400, total property tax bill is $6500. My district has one of the lower millage rates in Berks; this same assessment in some other Berks districts would have a school tax of $5600+.

            In Monroe County in the Poconos, homes currently on the market for $200,000 can have a total property tax load of as much as $10,000. The county currently has more than 3000 unoccupied homes where the owners have simply walked away and the housing market is in the toilet. The Stroudsburg district is anticipating another 4%+ property tax increase this year. Here’s an example: http://www.weichert.com/30563382/?cityid=14900&maxpr=204&view=gallery

    • Jim Combs says:

      Good morning Independent.

      During the last hearing before this bill was tabled Rep Cox was asked by a Repbulcian member whether he could accept a 50% elimination of school property taxes and without hesitation he answered no. Remembering that Mr. Baldinger and Rep Cox have long pointed out that there can be no delay in property tax forgiveness, ask yourself why the no answer. Simply stated, the reason is the push is solely a political goal.

      The numbers have NEVER worked – that explains why Mr. Baldinger and Rep Cox have not made them public so that they may be checked. Copied from my post below: Calculate the new taxes a couple with $50,000 of Pa taxable income and no dependents will pay [$634] and then divide it into the $9.6 billion that Rep Cox estimates to be needed in new statewide PIT and sales taxes and see that 15,141,956 of such couples must pay the new taxes to equal the replacement taxes Rep Cox estimates to be needed to eliminate school property taxes.

      Another thought-how many RENTERS will be forced to move to other locations when they are required to pay the replacement taxes? No one knows the answer but it is absolutely certain that there are many who are on fixed incomes and can’t aford to pay the additional taxes that this bill would require.

      One more fact, the bill transfers ALL sales taxes into the the Education Fund but only the diminished amount may be distributed to school districts.

      The problem is not democratic vs republican. The problem is the drafter wants to punish school boards and reek havic on public education.

  9. phillydem says:

    Dave, I live in Beaver County. This area has pretty much been depressed for the last 30 years when most of the mills closed and the good-paying blue collar jobs went with them. We are a high millage, low assessment area. Without doing the research and based on my own assessment, I’ll guess assessment is about 10% of market value for the vast majority of houses here that are mostly older, existing homes. (http://www.beavercountypa.gov/assessment-tax-claim-office)

    You probably know that 2/3rds of the state’s population lives Harrisburg and east. I’ll guess because of that, your area experienced a building boom and has newer existing home that are assessed at a higher value and therefore carry higher property taxes.

    Just because people bought more home than they could really afford, it doesn’t mean everyone is in the same situation. I’m generally sympathetic, but you know what they say about proper prior planning. Before I bought my first home 5 years ago, I was a long time renter. My first rent took half my monthly take home pay and my last rent was over a 1/4 of my monthly retirement income and did not include utilities.

    I think this was a bad bill, which is why I oppose(d) it. However, there is obviously great disparity in how assessments are done and how often. I would support a standard statewide assessment, maybe 10-20% of fair market value, as well as a standard interval when all properties are reassessed.

    • Okay, you’ve told me what I needed to know. I am very familiar with Beaver County since our coalition has a group there.

      The problem statewide isn’t just with the assessment system.

      Your good fortune – and that of some other areas of the state – arises from the state’s 1991 Basic Education Funding Formula. The BEFF holds all school districts harmless, meaning that all districts will receive the same relative funding as they did in 1991 in perpetuity regardless of changes in student enrollment.

      A poster child for this is the Berwick SD in Columbia County; they have lost 900 students in the past ten years while still receiving the same relative funding from the state and, despite the loss of enrollment, have managed to hire almost 40 new teachers. Their property tax load is less than 40% of their school budget.

      Contrast that with the York Suburban SD in York County that has seen a huge influx of students from Maryland in the past ten years. Fully 89% of their school budget is financed through local property taxes and the homeowners are being driven into the ground with relentlessly increasing property taxes.

      The discrepancies in the BEFF are the primary driver of the property tax problem and until the BEFF is corrected the problem will continue to escalate. Without exaggeration, the education funding system is headed for certain collapse if these problems are not corrected quickly.

      • phillydem says:

        Do you expect me to take you seriously when on one hand you’re claiming property taxes are forcing people out of their homes and then when a reasonable counter proposal is set forth, you move the goal posts to an entirely different argument?

        You sound like just another disgruntled home owner who bit off more than he could chew financially and now you want the rest of us to bail you and your compadres out and for OUR schools potentially to suffer because YOU made a mistake. Sorry, bub, not buying it. You need to take your own advice and start living within your means – just like I do. If that means selling your house and moving to more affordable quarters, so be it.

        • Wow. I thought we were having a reasonable discussion. I was only trying to explain one of the causes of the problem other than the assessment system and you turn on me like a mad dog?

          Just so you know, I retired from a good job with a pension, live within my means, and can afford my property taxes for the foreseeable future. But this isn’t about me, it’s about the unfortunate souls in Pennsylvania who haven’t been so blessed and about the schoolchildren who are receiving a substandard education because they’re stuck in communities that can’t afford their schools.

          I’ve tried my best, BUB, and since you can’t keep it civil I’m finished with this conversation.

        • Jim Combs says:

          Good morning Phillydem

          Mr. Baldinger seems to have a reasonable discussion only when he talks about property tax elimination and not the other effects the wording of HB 1776 potentially devastate public education and out states’ economy. Please reread my post above and not he has made no response whatsoever.

          Mr. Baldinger will not discuss related topics to the elimination of property taxes because he believes they are truly an act of “tyranny”. Just look how he has ignored my post above on June 7th. Explore his website at http://www.PTCC.us and see what he says. Note that there is no mention of the details of replacement taxes, data supporting Rep Cox’s claim that the numbers work to replace property taxes with new statewide sales taxes and personal income tax. As of yesterday when I spoke with the staff member of a House Appropriations Committee member, she had not seen supporting data either.

          Why would a person dedicated to eliminating property taxes not show the details and support to those who doubt? Remember that Cox’s “estimates” were available on this page before HB 1776 was submitted on April 10th. During the first hearing of the bill on May 21st, I heard Cox say his estimate was computed by the Appropriations Committee staff during February, 2012. Somehow Rep Cox communicated the results of the “computation” before it was made, or there is another study which the staff person I spoke with had never seen as of yesterday and which again for which there is no supporting data presented by the supporters of HB 1776.

          Notice Mr. Baldinger’s website no longer discusses the North Dakota referendum to eliminated property taxes which was voted down June 12th with 75% voting against it. For months, Mr. Baldinger touted the referendum. The home owners of North Dakota decided not to jump into financial anarchy.

          Re the number of individuals who would save their homes if HB 1776 becomes law, Mr. Baldinger and everyone else have no idea. Rep Cox and Mr. Baldinger reference a tax sale list with 10,000 names but have not determined the number who owe high 5 or 6 figures and would lose their homes even if HB 1776 was law to other creditors. I believe he doesn’t care. Search on Google for David Baldinger, HB 1776, and Tyranny. You will see Mr. Baldinger makes presentations to Tea Party groups but not to the PTA. Each presentation talks about the “tyranny” of property taxes. Ending the tyranny is Mr. Baldinger’s passion. His politics should be his own concern, but his willingness to accomplish the elimination of school taxes at the cost to a quality education and the Pa. economy should be everyone else’s concern. Rep Cox must believe property taxes are a tyranny. He was asked if he would support 50% property tax elimination which the numbers likely support, and turned the offer down during the June 11th hearing. So much for the dire straights of elderly home owners who need IMMEDIATE relief.

          Go to the webpage linked to Mr. Baldinger’s webpage which provides a calculator estimating taxes saved if HB 1776 becomes law. [http://www.ptcc.us/pfpfcalc.htm] Calculate the new taxes a couple with $50,000 of Pa taxable income and no dependents will pay [$634] and then divide it into the $9.6 billion that Rep Cox estimates to be needed in new statewide PIT and sales taxes and see that 15,141,956 of such couples must pay the new taxes to equal the replacement taxes Rep Cox estimates to be needed to eliminate school property taxes.

          Also read the motto at the top of Mr Baldinger’s webpage. It still is “Dedicated To Equitable Funding Of Funding Of Pennsylvania Schools”. Rep Cox removed the equitable funding provision from HB 1776 before it was submitted to the House on April 10th. The reason Rep Cox stated was “equitable funding” was not agreeable to the Representatives.

          Read the bill yourself. Note that for the statewide PIT, only individuals, trusts and estates are taxpayers. [Sect 321]. For the authorized local taxes, PIT and EIT payers include corporations, partnerships, and any other business association as “taxpayers”. [Sect 302 “resident” and “taxpayer” defined and Sect 304 authorizing a PIT on “residents” of a school district; Sect 502 “resident” and “taxpayer” defined, Sect 504 authorizing an EIT on “residents” of a school district] Then ask your accountant or any CPA how a corporation, partnership, or other business association can possibly have “personal income” or “earned income” subject to a tax. HB 1776 supersedes all prior legislative acts and creates this situation. Then ask your accountant the logic of a corporation [whether a pass thru entity or a c corp] is not subject to state PIT but is subject to local PIT or EIT? Finally, understand that all business entities are taxpayers with the same “income” taxed to the owners, except for c corps.

          At the 3rd hearing June 11th, a Republican member pointed out that HB 1776 transfers the sales taxes currently collected and placed in the general fund into the “education” fund. Currently sales taxes are 32% of the general fund. Obviously the shell game to be played is how much of the current state school appropriations will be cut in the future because their source was the statewide sales tax? I. E. some of the current state appropriations will end in the future because the state’s general fund revenue decreases by 32%.

          If Rep Cox and Mr Baldinger were serious about “full funding” of public education and their claim the numbers work, HB 1776 would “guarantee” state funding replacement of the eliminated property taxes AND other current state educational funding. They do not make any guarantee and will not do so.

          Let me give a small example of the apparent distain Rep Cox has for public education. Section 704(12)(ii) excludes from sales tax a purchase made by a parent homeschooling a child for educational purposes while the same purchase made by the parent of a public or private school student is subject to the 7% tax. For example, if a $1,000 computer is bought by the supervising parent for home school use, there is no tax while the parent of a child in public school will pay $70 sales tax. Of course, how does the merchant know a child is home schooled or enrolled in public or private school?

          Does HB 1776 bail out property owners! Of course without a doubt. Upon passage, initially businesses don’t pay a “penny” to support public education. All homeowners who failed to make a satisfactory down payment and/or estimate their ability to pay their mortgage and other home expenses have their school taxes eliminated.

          Let me end this post by saying if the numbers would work, business paid its fair share to support education, and the funding equal to current property taxes and state funding were guaranteed, I would offer to help Rep Cox with the wording of the bill. Unless he intentionally used the wording in HB 1776, it seems self evident that drafting help would be needed.

          • phillydem says:

            Of course the intent was never equal funding for public schools, it was to squeeze funding for them so they can’t build new buildings or pay benefits/wages to their employees. The “TAJ MAHAL SCHOOLS” (sic) reference on Baldinger’s website told me that. Conservatives/libertarians like Baldinger want everyone but themselves to live within their means. I don’t take them seriously because they’re not serious people.

          • You and phillydem are exactly the reason I refuse to engage with radical ideologues from both ends of the political spectrum. You make assumptions, distort facts, hold rigidly fixed opinions, and refuse to consider any point of view that doesn’t support your agenda.

            I’m going to reply to your latest rant and then permanently end my participation in this “discussion.”

            Regarding your paragraphs two and three, the numbers are outlined in a sidebar at http://www.ptcc.us/solution.htm. These numbers were derived from information provided by a member of the House Appropriations Committee staff who has been involved in this legislation for many years and to whom you did not speak and from the Governor’s 2012-2013 budget book. You assumed that since the person on the AC staff to whom you spoke knew nothing the numbers didn’t exist. You simply spoke to the wrong person. Further, the Governor’s budget book is public record and you can research that for confirmation of the numbers. Be prepared, though, to have the bubble of your argument burst.

            “Mr. Baldinger’s website no longer discusses the North Dakota referendum …” That’s an outright lie. The website has not been changed in the least since the referendum on Tuesday. The North Dakota banner is still at the same location on the home page and the story is still available at its original location. On that topic, if you’d care to research the facts, you’ll find that the supporters of the referendum were outspent 15 to 1 by their special interest opponents that included both unions and corporate entities who claimed, in essence, that the elimination would devastate the state’s economy and the world as we know it would come to an end. The voters of North Dakota were scared silly by the special interests and it’s no surprise that they rejected the referendum. And notice that, among others, corporations opposed the measure – so much for your corporate welfare argument regarding HB 1776.

            “You will see Mr. Baldinger makes presentations to Tea Party groups but not to the PTA.” What’s your point? I will give the presentation to any group that requests it. How is it my fault if no PTA has asked me to speak to them? And by the way, in the past month I have given the presentation to two non-Tea Party affiliated groups. I spoke to a meeting of the AFSCME local (Gasp! A union group!) in Wilkes-Barre on May 17 and on June 7 the plan was presented to the Dana Corporation (mostly union) retirees. Do not try to paint me with an agenda brush that does not exist to justify your viewpoint. Finally, I rarely use the word “tyranny.”

            “…but his willingness to accomplish the elimination of school taxes at the cost to a quality education and the Pa. economy should be everyone else’s concern…” Like most ideologues, you are clueless because you have not thoroughly research the topic. Do you have the slightest understanding of the depth and breadth of the problem?

            With the downturn in the housing market, many school districts have lost substantial revenue through assessment appeals by both businesses and homeowners. Just a few examples are:

            - Chester Schools, $180,000 annual loss from a single appeal by a shopping mall.
            - Wyomissing Schools, $250,000 annual loss through a single appeal by a nursing home.
            - Upper Merion Schools, $2 million annual loss through a single appeal by a manufacturer.

            And these are only a few examples of many throughout Pennsylvania. On April 17 a school district business manager from Montgomery County wrote to me saying, “Our district is the poster child for property owner initiated tax assessment appeals. We have lost $94 million in assessed value in the past year alone. This translates into $1.7 million in revenue lost just since last year. We have over 50 cases pending in the court system as well.”

            The “quality education” you describe is being threatened by the instability of the property tax that is driven by assessment appeals. How do you propose to solve this problem? Oh, sorry. I forgot that you have no solutions, only criticisms.

            “…if he would support 50% property tax elimination which the numbers likely support, and turned the offer down during the June 11th hearing. So much for the dire straights (sic) of elderly home owners who need IMMEDIATE relief….” Again, your lack of knowledge negates your argument. The relief described here is not possible because of the uniformity clause of the Pennsylvania Constitution that requires all entities in a taxing body to be taxed at the same rate. To do this would require a constitutional amendment, a solution that can take as long as four years. You call that immediate? Besides, partial “relief” doesn’t work unless property tax increases are capped. The property tax will eventually will rise to its previous level, leaving the homeowner in the same position but with new taxes to pay to support the “relief.”

            “…see that 15,141,956 of such couples must pay the new taxes to equal the replacement taxes Rep Cox estimates to be needed to eliminate school property taxes.” Ridiculous. You use one example to determine the overall effect of the legislation. All you need to do is experiment with various income levels, income types, property tax loads, and other variables to see that your $634 example is valid for few people. The second largest industry in Pennsylvania is tourism. Have you in any way factored into your computations the contributions to the sales tax by visitors? Again, you are distorting the facts to suit tour agenda. Is there an honest bone in your body?

            You rail on about eliminating the property tax for businesses – a common objection raised by those of your ilk – and since you span several paragraphs with this rant I’ll respond in general terms to the overall concept.

            The issue is not large corporations. Eighty percent of non-government jobs in Pennsylvania are provided by small businesses. As the second biggest fixed expense for these job creators, the property tax, through its uncertain nature, discourages small business expansion and hinders job growth.

            A small business owner from York County recently wrote this, “As a small company owner in the auto and truck repair trade that already has five workers, we were looking to open a second branch in York. We would have been able to hire at least three to five more people to run the second location. The monthly lease payment was two thousand dollars, but then our lawyer found that the school taxes would be twenty-three thousand dollars per year. We have now put the brakes on opening a second branch in Pennsylvania and we have been looking at other states to open our new location.”

            The enactment of HB 1776 would give these entrepreneurs a well-deserved break and would allow them to expand their businesses and create much-needed jobs for Pennsylvania.

            And through Keystone Opportunity Zones we already know that targeted property tax abatements attract new businesses to Pennsylvania. We currently allow the politicians to choose these winners and losers; why not eliminate the property tax and welcome new businesses by making the entire state a KOZ?

            “…a Republican member pointed out that HB 1776 transfers the sales taxes currently collected and placed in the general fund into the “education” fund.” I will concede this point to you. The current sales tax code was transferred almost intact to the HB 1776 language. The current SUT revenues were never meant to be transferred into the property tax replacement fund; this was an error that was overlooked by the LRB during drafting and will be corrected by amendment. All current SUT revenue will remain in the general fund.

            For the past eight years this effort has been my full-time unpaid job and I daresay that my knowledge base on this issue is far larger than yours or that of most of the members of the General Assembly who view the problem simplistically as one of property tax “relief.” When it comes to this effort I have NO political ideology and NO hidden agenda but only look to solve the problem in a fair and expeditious manner. Your snide insinuations about my political ideology and my supposed goal of destroying the education system are nothing more than a feeble attempt to discredit my work by attempting to ascribe to me a philosophy and agenda that is popular with your radical colleagues.

            I’ll end this with two questions. When was the last time you actually worked and contributed anything of substance to any of society’s problems other than ranting on Internet discussion boards? When was the last time you were willing to compromise on anything that didn’t fit your radical agenda? It’s an easy task to sit on the sidelines and throw darts at the ideas of others but something entirely different to actually get into the fight and make a difference. Get to work and show me what you’ve accomplished if you want to be taken seriously.

            To make an assumption of my own, I see both of you as disgruntled, angry people who sit at their computer keyboards in their dirty underwear all day complaining about the efforts of those who truly work for a cause without actually contributing anything of value yourselves. You are pathetic little men with rigid, narrow-minded attitudes and are to be pitied rather than censured.

            As a good friend frequently said to me, “Never try to teach a pig to sing. It wastes your time and annoys the pig.” I’ve wasted enough time. My participation in this conversation has ended.

  10. dancer says:

    Saying that this will eliminate property taxes is a misnomer. Each district is reponsible for funding 1/2 of the pensions that will be ballooning out of control within the next couple of years. Quotes are as high as causing our school taxes to double (or more) within the next few years. Imagine if this burden is put on homeowners in addition to present school taxes what the reaction of the public would be. That being said, I believe that this bill is being offered to allow the cost to be spread around, but with the increased pension bill put on the taxpayers, the homeowers will be paying the same if not more than they are now and in my opinion this bill nothing more than a scam to cover the legislators against a revolt when this does happen. If construction of schools is needed this would again be placed on the homeowners. Conservative districts which have held down spending in order not to raise taxes will get the least money (for the first year, no provision of what will happen after that) while districts which spend and spend would get the most money. For every dollar collected now a dollar is spent within that district, what will be returned from Harrisburg, maybe $.70 on the dollar? Instead of addressing the problems, one being the pensions, which are unsustainable and will bankrupt out state, the legislature tries to cover the problem by simply adding more taxes for additional revenue. We will wind up being burdened by all kinds of taxes. We need a Scott Walker to lead the way in PA.

  11. Jim Combs says:

    Of course your conversation has ended. Using your words, you rant and rant but don’t provide a word of support to the claims you make. Where is the appropriations committee study which purportedly supports the economics? My point is that there no data supports your claims that I have seen. Produce the data. Answer the statements made concerning particular sections of the proposed legislation.

    Good luck teaching the pig to sing.

  12. Jim Combs says:

    I just checked your webpage Mr. Baldinger. I found the North Dakota info this time; perhaps AOL didnot load your page correctly.

    Otherwise, it is fascinating that you refuse to provide data and specific responses to the drafting issues I and others have pointed out to your legtislative child.

    Also interesting is the following post that I found in a short search. Of course, 1776 does not provide a dollar for dollar substitute as I detailed in an early post to this site.

    http://upperdublin.patch.com/articles/school-district-passes-budget-proposal-including-tax-increase
    David Baldinger
    7:57 pm on Sunday, May 20, 2012
    Gerry, you obviously have not done any research to find out exactly how this legislation works. It is a strict dollar-for-dollar swap for the property tax in each district with no funding formula to redistribute to money to other districts.
    Please take some time to learn the facts before posting your erroneous assumptions. Everything you need to know is at ptcc.us.

    • Jon says:

      The funding levels are the easy part. If the bill doesn’t raise enough money, then you can just raise the tax rates to bring in more money. The relevant issue is whether local funding + property taxes are a better way to pay for education than state funding + sales/income taxes. I still say state funding is better.