Will Pennsylvania School Property Taxes Be Eliminated?

Property taxes have perhaps been one of the most controversial taxes in the Commonwealth of Pennsylvania. These taxes increase the cost of home ownership, and can be a strain for fixed-income households. However, with their long-standing history and the need to fund schools, previously proposed bills have fallen short of making a change.

House Bill 13 – Elimination of Property Taxes

Representative Frank Ryan (R) of Lebanon County plans to introduce House Bill 13 in mid-September. The bill lays out that in order to eliminate property taxes, the revenue gap would be filled with:

• An additional 1.85% local income tax, bringing the Pennsylvania personal income tax rate to 4.92%.
• A 2% local sales tax, increasing the sales tax rate from 6% to 8%. The 2% local tax would also be imposed on food and clothing which are not currently taxed.
• A 4.92% tax on retirement income, excluding social security income.

As with other bills, it can be expected that critics will be quick to make their voices heard. Specifically, the additional tax on retirement income negates a large portion of the relief for seniors, as this type of income is not currently taxed in Pennsylvania. Opposition to the bill will also likely point out that the bill shifts the tax burden further on individuals since businesses currently paying property taxes would not be affected by the income tax increases. Additionally, this bill would only remove school property taxes, so homeowners would still have to pay county and municipal property taxes. On top of that, there will be additional administrative costs to implement these changes.

As you can see, although the elimination of school property taxes is appealing, it does not come without a cost. As this bill and other similar bills move forward, Pennsylvanians should be urged to contact their representatives to make their opinion heard. For any questions on this article or Pennsylvania taxes, please contact State and Local Tax expert, Lindsey Waltemyer at lwaltemyer@macpas.com.