Early Property taxes

To fund various state obligations, PA began using a property tax in 1683.

(References: A History of the Property Tax in America and The Property Tax and its endless reform

PA Sales Tax

A Sales Tax was implemented in 1953 for the sole purpose of funding education. (However, it didn't eliminate property taxes at the time.)

Property Tax Rebate Program

This program was implemented to help low-income seniors pay a reduced property tax from the Pennsylvania State Lottery.

Casino Gaming

Gov Ed Rendell legalized casino gaming to provide property tax relief. (The relief was small, and the property tax continued to rise.)

Act 1 - Tied to inflation, with a caveat

Act 1 tied the fast-increasing property tax to inflation. However, schools could request higher-than-inflation tax rate raises. 1/3 of schools receive grants each year. Pension exemptions continued to drive the cost.

House Bill / Senate Bill 76

In 2011, The "Property Tax Independence Act" was introduced the 1st time in the PA State Senate. It proposed an expanded Sales tax (to cover many goods/services), raised the sales tax from 6 to 7%, and the income tax from 3.07 to 4.00%. It was not put forward for vote, as it only had a small portion of senators supporting it.

In 2013: It was reintroduced, this time with 26 members in bipartisan support (Republican and Democrat).

In 2015: It was reintroduced (SUT at 7% with an expanded tax base, PIT at 4.34%) , with nearly 23 of the senate co-sponsoring. It was brought for vote in November 2015. It was tied 24-24, with the Lt. Gov breaking the tie with a 'nay' vote. This is the closest this bill would have gotten to passage.

In 2017: It was reintroduced with 20 co-sponsors. The PIT rate was increased to 4.95% to accommodate property tax growth. No vote.

In 2019: The bill was re-introduced with only 7 co-sponsors. No vote.

The bill was not re-introduced in 2021. The bill would need revised to 8% SUT with an expanded tax base and 4.95% PIT for the numbers to have worked.

The primary complaints of SB76/HB76 were:
1) Tax burden falls disproportionately on the young and working class (no retirement tax), with the PA IFO predicting an out-migration of 222,000 working-class residents, and an in-migration of 673,000 retirees over 10 years.

2) Fear of money flowing 'through Harrisburg'. Lack of local control worried PA residents and legislators.

3) Most schools carried debt payments via property taxes, and these would continue for some time under SB/HB76 4) Property tax elimination gets passed on to property owners, but there was no guarantee that it would reduce rent.
2019-2021 (and beyond)

HB13 (A new and Improved 'HB76')

This legislation (as of Q4 2021) has not been introduced, but has been circulated in 'DRAFT' form for review as "House Bill 13"

  1. It updates the tax numbers (8% Sales, 4.92% Income, and expanded Sales/Income) to accomodate 2021+ numbers
  2. The +2% sales tax (6 to 8%) and +1.85% income tax are LOCAL taxes, meaning they doesn't flow through Harrisburg
  3. The In/Out-migration issues are solved by taxing (NON-Social Security or equivalent) retirement income. This way, the tax falls evenly on retirees and working class. (Retirees collectively save 75%.)
  4. Debt payments: This bill improved on SB76 by accounting for existing debt.

What Lessons can we learn?

We can piece together 'what worked' and 'what failed' in previous bills.

  • Sales and Income taxes are stable and widely accepted
  • "Relief" plans only provide short-term relief. The property tax will continue to rise faster than inflation.
  • In-Migration/Out-Migration is an issue. Taxing more equitably (retirement) would better prevent state insolvency.
  • If we don't do it NOW, we'll never be able to replace it with Sales/Income tax. (They'll exceed 8% Sales or 5% Income tax limits that are unfavorable.)