REPORT: The Price of Property Tax Elimination

Date of Press Release: 
April 6, 2017

HARRISBURG - The Keystone Research Center today released a new report that provides the first estimates of the impact of property tax elimination proposals on families in Pennsylvania.

The full report can be downloaded here.

See School District-specific data here.

See a series of charts and maps detailing the impact of property tax elimination here.

The report finds that, far from providing relief for working families, recent proposals to eliminate school property taxes in Pennsylvania would increase taxes on the middle class while sabotaging the chance to adequately fund Pennsylvania schools for middle- and low-income families.

In the proposal being considered by legislators in Harrisburg, the elimination of school property taxes across the state is offset by increases which include raising the personal income tax by 61% (from 3.07% to 4.95%); increasing the sales tax rate 14% to 7% (from the current 6%); and expanding coverage of the sales tax to previously untaxed goods like food and services.

The report released today, authored by labor economist Mark Price, finds that such a proposal would, on net, raise taxes for virtually all Pennsylvania residents. Even after accounting for a reduction in local property tax bills of, on average, $1,685, the typical tax bill for Pennsylvania families would rise by $334 next year.

The report also finds property tax elimination increases the tax burden faced by middle income families the most. As a percentage of their income, middle income families – those earning between $22,000 and $63,000 – will absorb the biggest tax increases as a proportion of their income under property tax elimination. On average, these families will see an increase in taxes of between $269 and $326 a year.

Beyond that, the largest amounts of property tax relief would go to affluent families in rich school districts. For example, affluent Lower Merion School District in Montgomery County would receive 22 times as much in state funds for school property tax elimination as the high-poverty Reading School District in Berks County ($23,219 per student versus $1,034). Under the plan the eliminate school property taxes, in the 125 most affluent (lowest-poverty) school districts as a group, school districts would receive $10,703 per student in property tax relief, nearly three times as much as the $3,721 on average in the 125 highest-poverty school districts. Half of those highest-poverty school districts are in rural communities.

In 2015, the legislature changed how new public education funding is distributed, with the new, research-based formula taking into account the actual cost of a quality education in each district. Yet property tax elimination would distribute funds to districts in roughly opposite proportions to the basic education funding formula.

“What’s important to note is that, in addition to raising taxes overall, school property tax elimination provides no increase in overall education funding. If the aim of this legislation is to provide tax relief to middle class Pennsylvanians, while also increasing the quality of public education in Pennsylvania, our analysis shows it fails on both accounts,” said Price. 

The full report can be downloaded here.

See School District-specific data here.

See a series of charts and maps detailing the impact of property tax elimination here.

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