PAR study reviews proposed property tax reform bill

By Kim Shindle | Oct. 3, 2012 | 3 min. read

Property tax reform legislation currently proposed in the state House would have a significant negative fiscal impact on the state and the average school district, according to testimony presented on behalf of the Pennsylvania Association of Realtors® (PAR) before a House Select Committee earlier this week.

PAR commissioned an independent review of House Bill 1776, which showed the shortfall to the state revenue from the bill could be as high as $1.8 billion in the first year. Jason Horwitz, a consultant with Anderson Economic Group, presented the results of his company’s findings before the House Select Committee. House Bill 1776 proposes to eliminate the school property tax for schools and replace it with increased state sales and personal income taxes.

“In the first year, we expect that the state would be required to pay out approximately $10.7 billion to school districts in order to compensate them for decreased operating revenues,” he said. Those would be partially offset by savings and revenue increases from other sources which total $8.9 billion. “The net result of the changes contained in HB 1776 would be an estimated negative fiscal impact of $1.8 billion for the state government,” Horwitz said.

School districts would be hit hard as well. Horwitz said, “The economic review shows a decrease of total revenues for school districts statewide by approximately $760 million in the first year.”

“Based on the research commissioned by the Pennsylvania Association of Realtors®, the association believes the current proposed legislation falls short of what is needed for real property tax reform in the Commonwealth,” said Greg Herb, chair of PAR’s Property Tax Steering Committee.

“While PAR’s research shows that HB 1776 would be beneficial to the housing market in the first year, we believe it’s more important to focus on the overall impact this bill will have on the Commonwealth,” Herb said.

The bill proposes to replace school property tax funding by:

  • Increasing the personal income tax rate from 3.07 percent to 4.01 percent
  • Increasing and expanding the sales and use tax
  • Eliminating property tax rebates and partially offsetting an increase in rent rebates.

Horwitz explained, “If the legislature were to make House Bill 1776 revenue-neutral by further increasing the personal income tax, the rate would have to be increased to 4.53 percent.”

“As a strong advocate for private property rights and home ownership, the Pennsylvania Association of Realtors® takes property tax reform seriously,” said Frank Jacovini, president of the Pennsylvania Association of Realtors®. “We welcome the opportunity to offer meaningful research to our legislators as they work to find a solution to property tax reform.”

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