Selling a Shell Game called Property Tax Reform – School Funding in Pennsylvania

by Tom Wolpert on April 9, 2014

Why Pennsylvania Property Tax Reforms Never Go Anywhere

I have been involved in public education as a volunteer Board Member for many years.  I served on the West Chester School Board for four years, and for almost fifteen years I have been on either the Chester County Intermediate Unit Board (about two years) or the Chester County School Authority Board (the last role, as Chair, for over ten years).   During the entire time, there has been constant political rumblings about changing the way public (and charter) schools are funded in Pennsylvania, which is through real estate property taxes.  Invariably a movement resurfaces, and when it fails, its proponents believe sincerely that a mysterious gathering of shady political forces somehow defeated common sense.  One of the latest iterations of that viewpoint is a recent local column in the Norristown Times Herald by Stan Huskey.  Mr. Huskey ruminates in his column for a few paragraphs, and then comes out with the following explanation: “It has to be fear.  Fear of the unknown.  Fear of change.”

Let me suggest some other explanations.  Because the problems are structural, not political, and they certainly are more substantial than the nebulous ‘fear of change’ proposed by Mr. Huskey.  First of all, all of these movements revolve around replacing the real estate property taxes with income taxes.  There are many reasons why such a change could be objectionable, but the biggest immediate problem is that income tax collections are so variable, depending on the economy.  By contract, collections from real estate taxes are remarkably stable and predictable.  Schools are in the business of putting together educational programs for children that will last for years, and are only effective if they are followed through with during that entire time period.  If there is an AP-oriented program for advanced math classes in high school, if there is a Spanish language program for first graders at an elementary school, the math whiz students don’t get any real benefit unless it last for four years, and the elementary students don’t get any real benefit unless the program continues uninterrupted for six years.  The variation in taxes collected by the Commonwealth of Pennsylvania has been from about $32.12 billion in 2008 to $30.17 billion in 2010, back to $32.95 billion in 2012.   A school budget has about 70-80% of its total revenue absolutely irrevocably committed to salary and benefits, generally established by collective bargaining agreements.  So a 10% change in the amount of funding to the schools would have a massive effect on the ability of the school district to continue its programs.

Second, all schemes to shift away from property taxes to income taxes allow the major commercial real estate tax-payers a complete walk-away, with no visible means to replace their lost tax revenue.  The reason that property taxes in the West Chester Area School District are less than half of the Daniel Boone School District isn’t because the demographics of the residents are different; its because the West Chester Area School District collects massive property tax revenue from the malls, shopping centers, industrial parks, etc. that are commonplace in that school district, but largely absent from Daniel Boone’s.  Why would anyone concerned about education in Pennsylvania give a walk-away to the management companies of the large commercial mall complexes, when those management companies are absent from the state to begin with, and are basically hedge funds holding real estate?

Third, all ideas about shifting taxation from property taxes to income taxes means the local residents lose control of what is going on in their districts.  Whatever debates we had about funding in the West Chester School District, at least we were not debating anyone in Harrisburg, Pittsburgh or Philadelphia.  If we wanted to spend millions of dollars on a swimming pool for Bayard Rustin High School, or were determined that we not do so, the debate was a local one.  The people whose children would get the benefit, and the people who had to pay the taxes for the school, were all in the same room, and were basically neighbors.  Do we really want to turn over the local control of our schools to politicians or interest groups (however well meaning as some of them are) resident in Harrisburg?   The obvious answer is no.

The driving selling point for all the variously enacted (but ineffective) and not enacted, but promised legislative ‘fixes’ is that somehow, by shifting the taxes for schools from property tax to income tax, and from local sources to state-wide sources, the tax bill will be magically better, different, lower.  Some people will be greatly benefited, and no one will be inconvenienced.  Since it can never work that way in the real world, the proposals are made, politicians declare themselves to be in favor of them, but somehow the bills stall.  They stall because the real increases needed to income taxes for this massive proposed shift in the tax base (on top of all the other, statewide drivers for increased income taxes) are just unsupportable.  An income tax increase like that is naked political suicide.  Hence the shell game.



{ 0 comments… add one now }

Leave a Comment

Previous post:

Next post: