There have been discussions about eliminating Pennsylvania’s property taxes for decades. Finally, after two years of intensive study and meetings with various stakeholders, I am co-sponsoring the School Property Tax Elimination Act, House Bill 13. 

This bill eliminates school property taxes 100% and prohibits school districts from reinstating them. However, the $15 billion in state revenue lost through school property tax elimination must be replaced.  

Under House Bill 13, the majority of replacement taxes would remain local to our school districts. Accordingly, this bill would create a “local personal income tax” of 1.85%, paid directly to the school district, and a “local sales tax” of 2% added to items on which sales tax is already collected. Additionally, the local 2% sales tax would be extended to food and clothing. These items would not pay the full 6% sales tax and recipients of SNAP benefits or other public assistance would be exempt from taxes on food. Social Security would not be taxed. The sales tax would be allocated to school districts in the county in which the sales occurred. 

In addition:
• Retirement income would be taxed at a rate of 4.92% with 3.07% of that tax going to the state and 1.85% going to the local school district. Seniors would save 75% of all the taxes they currently pay. 
• Landlords would be expected to lower rents by the amount of property taxes saved unless they can prove that they did not raise rents when property taxes went up. 

The legislation also creates a “lender of last resort” for school districts in financial distress. The $500 million fund is designed to protect schools and communities in the event of a catastrophe. There is a working commission within the Pennsylvania Department of Education that would allow for legislative fixes or executive branch intervention in school districts facing unforeseen financial problems. 

This bill helps to ensure that your tax dollars are spent where you live. It also ensures that school districts cannot reinstate the property tax, a fear that many of you have expressed. Renters, who comprise over 40% of our population, are expected to benefit from this bill since property taxes have been built into their rents. 

Everyone bears both the costs and benefits of this legislation. However, we believe we have reached a compromise that is fair to all and will keep our younger people from leaving the state.  The Independent Fiscal Office five-year outlook provides an insight into Pennsylvania’s stagnant growth and substantial budget shortfalls over the next five years. When combined with declining population for citizens under age 60 and significantly increasing population for citizens over age 65, the trends continue to be negative for the Commonwealth. If we take decisive action now to reform our tax policies for working families, seniors, businesses and school districts with the fundamental shift in the elimination of property taxes we can reverse these negative trends.

Eliminating the property tax is critical to the economic viability of the Commonwealth. The bill that I am co-proposing will address this issue and provide for an orderly phase-in to enable schools and communities to adapt to the new system without disrupting students.