RIP: The School Property Tax
March 23, 2015
G. Terry Madonna & Michael L.Young
Governors propose and legislatures dispose.
That particular political adage could be one that Tom Wolf, the Democratic governor of Pennsylvania, might ponder as he begins the likely lengthy process of steering his budget and tax proposals through the state’s Republican dominated legislature.
Wolf’s budget proposes major tax restructuring designed to reduce Pennsylvania’s property tax burden by 50 percent on the average taxpayer. But if 50 percent, why not 100 percent-why settle for half a loaf? Why not get rid of the property tax for school funding altogether?
It is a radical idea, an extreme idea, an unrealistic idea?
Many legislative Republicans would like to do so, and Wolf is certainly moving in that direction. Pennsylvanians widely favor it as well.
Moreover, the argument for abolishing the property tax as a source of public school funding is compelling. Doing so would comprise one of those rare moments in government where officials have the opportunity to do something that is not only good politics, but also good policy and good economics.
Pennsylvania’s property tax, like property taxes in many other states, is a fossilized artifact from the 19th century that faltered badly in the 20th century and failed spectacularly into the 21st century.
There is not much good to say about it – and few do so. Economists and public finance experts have produced entire libraries documenting the foibles of the property tax. It’s a very long list.
FAIRNESS – the property tax is regressive, unfairly falling on seniors and others with fixed incomes or less means to pay it.
COST- the property tax is enormously expensive for government to collect compared to modern “broad based” taxes like income or sales.
EFFICIENCY - the property tax is “inelastic;” economist speak for a tax that fails to raise enough revenue to pay the bills.
COMPLEXITY - the property tax is unreasonably complex, relying on arcane metrics like “millage” and wildly disparate valuations that make it byzantine and baffling to taxpayers.
UNPOPULAR– finally, the property tax is repugnant to most taxpayers, deeply resented and widely unpopular.
U. S. Secretary of Education Arne Duncan recently revealed that: "The state of Pennsylvania is 50th, dead last, in terms of the inequality between how wealthy school districts are funded and poor districts." Pennsylvania is the worst of the 50 states in achieving equal funding among its 500 districts. This embarrassing outcome, prejudicial to poorer school districts, is mostly the result of using the property tax to fund education.
Among all the major taxes Americans pay, including income and sales taxes, property taxes are the worst by any measure used. Taxpayers loathe them; politicians deplore them; economists condemn them.
And this worst and most reviled of taxes is the tax we use to support arguably the most important function of government – education.
This sad state of affairs has gone on too long. Administration after administration going back to Robert Casey and earlier have tried to somehow “reform” the property tax, to make it fairer and more efficient. All of these efforts have ended badly.
Now in the 21st century, talking about “reforming” the 19th century property tax really is just rearranging the deck chairs on the Titanic long after the iceberg has been hit.
The property tax cannot be reformed – but it can be abolished.
And now, Governor Wolf and the GOP legislative majority have an opportunity to do just that - abolish the property tax for school funding completely. In the recent past Republicans in both the House and Senate have introduced legislation that would do the job.
But make no mistake about it - Pennsylvania’s 500 school districts need a predictable, reliable, and fairly distributed source of funding - and abolishing the property tax means that funding must be shifted to broad- based state taxes like income and sales. In addition, the school districts should retain some strictly local sources of funding to avoid total dependence on state funding.
Getting a left-of-center Democratic administration to an agreement with a well right-of-center Republican legislature will not be easy. It will require leadership, vision and political courage – not qualities always seen in state politics. But the stakes are high and the opportunity is rare.
Both sides really want the same thing here – a sane tax system in support of a stable revenue source for schools. Realizing that comity of interest is half the journey.
Getting rid of the property tax means Wolf wins, the GOP wins – and most important of all, the long-suffering taxpayers of Pennsylvania win.
It doesn’t get better than that.
Politically Uncorrected™ is published twice monthly, and previous columns can be viewed at http://www.fandm.edu/politics. The opinions expressed in this article are solely those of the authors and do not necessarily reflect the opinions of any institution or organization with which they are affiliated. This article may be used in whole or part only with appropriate attribution. Copyright © 2015 Terry Madonna and Michael Young.