Threading the Property Tax NeedleReducing Property Taxes and Responsibly Funding Schools
Presenter:
Stephen HerzenbergEconomist and Executive DirectorKeystone Research Center
[email protected]; 717-805-2318
An Outline Of What We Will Discuss Today
• Property taxes in PA as a whole and school districts
• The impact of property tax elimination
• Targeted property tax relief – the concept
• Targeted property tax relief – the cost with different assumptions
• Targeted property tax relief, increased school funding, and the fair share tax: a winning formula?
Funding School Property Tax Elimination: A Reverse Robin Hood Proposal
• School property tax elimination funded by a 61% increase in the personal income tax rate (3.07% to 4.95%) and hike in the sales tax to 14% to 7% (from 6%), imposed on more services and products
• The Institute on Taxation and Economic Policy (ITEP) estimates that higher sales and income taxes would fund a reduction property taxes (for residents and nonresidents) of $14.1 billion.
• ITEP estimates that on average families in Pennsylvania pay $334 more in taxes 2017-18.
Targeted Property Tax Relief to People Who Need It Most
• Limit relief to taxpayers • below a certain income (e.g., $50,000, $80,000, or $110,000)
• whose property taxes are above a certain fraction of their income (e.g., 3% or 4%)
• Place a cap on the amount of relief per family (none, $1,000, $2,000)
• With these variations• Cost ranges from $297 million to $1.7 billion
• Families below $40,000 receive 41% to 100% of the relief
The Targeted Property Tax Relief Sweet Spot
• Option 1: 3% income threshold, $2,000 cap, eligibility to $110,000• …decent distributional properties
• …drive significant money to suburban Philadelphia households
• …cost of around $1.3 billion
• Choose
• Option 2: if the cap is $1,500, the cost would be about $1 billion
House-
hold
Income
PTRR
Eligibility
Income
Below
$50,000
From
$50,000 to
$80,000
From
$80,000 to
$110,000
3.0% None $1,718 $1,776 $1,747 43% 32% 25%
3.0% $2,000 $1,151 $1,189 $1,170 42% 34% 25%
3.0% $1,000 $732 $756 $744 42% 34% 24%
4.0% None $1,271 $1,326 $1,298 50% 30% 21%
4.0% $2,000 $853 $889 $871 48% 31% 21%
4.0% $1,000 $544 $567 $556 48% 32% 20%
%age of
income
above
which
property
taxes are
eligible for
relief
Share of Relief to Households
Cost of
Relief
(millions)
Targeted Property Tax Relief Variations in Which Incomes Below
$110,000 May Receive Relief
Rebate
cap
%age of
income
above
which
property
taxes are
eligible for
relief
Calculated Amount
and Cost of Relief
(millions)