Senators Judy Schwank (D-Berks) and David G. Argall (R-Schuylkill/Berks) talked about tax reform at the Northeast Berks Chamber of Commerce member breakfast program on Sept. 18.
The Chamber’s first member breakfast program of the season, held at Berkleigh Golf Club in Kutztown, was sponsored by Robert J. Hobaugh, Jr., Esq., Stevens and Lee, P.C.
“This is a very exciting year because we have a budget that’s filled with ideas and controversy and issues. Two of them revolve around tax reform,” said Hobaugh.
Schwank said she and Argall were there to talk about the status of property tax reform in Pennsylvania.
“At the outset, we should say that it’s not that nothing has happened; there are a lot of things happening, but one of the interesting things this year is the Governor also is interested in property tax reform.”
She said the Governor’s proposal uses the same revenue sources that others have looked at for property tax reform, which is increasing the sales tax and maybe expanding it and increasing the personal income tax.
“Taxes are never easy for anybody no matter what your political persuasion is because we know there’s a real impact on people,” said Schwank.
House Bill 504 expands the Pennsylvania sales tax from 6 percent to 7 percent and no additional items would be taxed. The personal income tax would increase from 3.07 to 3.7 percent, adding $125 million to the state’s property tax rebate program and continue to include the $600 million in slot proceeds to reduce home owner property taxes, explained Schwank.
“The Governor also cares about property tax relief,” said Schwank. “Under his plan we’d increase the sales tax from 6 percent to 6.6 percent and expand approximately 45 items that are not currently taxed.”
Philadelphia would not increase, remaining at 8 percent and Allegheny County would go from 7 to 7.6 percent. Also, the Personal Income Tax would be increased to 3.7 percent.
“Where his plan differs is that he would use some of that money also to fill that budget hole but it would go in a weighted formula to school districts, so the poorest school districts … would probably get more,” said Schwank.
“His plan hasn’t always been well received. The good news is he cares about property taxes and he wants to do something about it. It’s my hope that as we work on this we get to something much closer to what most of us would like to see, which would be the elimination… the question is are we ready to trade off an increase somewhere else in order to eliminate school property taxes. Many people will say that’s exactly what we’d like to see,” said Schwank.
“Property tax dates in this state back to 1834 and from what I’ve been able to see people have been complaining about it at least that long,” said Argall. “It’s a terrible tax. It’s not based on income; it’s not based on fairness but I suppose it was the best they could do in the 1830s and we have to find a better way, a fairer way to fund our public schools.”
Argall said Senate Bill 76 was developed by the Pennsylvania Coalition of Taxpayer Associations with more than 80 local groups statewide who then approached Schwank and Argall on introducing “their” bill four or five years ago.
“They wrote this thing and they did a good job with it,” said Argall, noting that legislative staff refined the bill. “What they essentially said was look, you’ve tried to tweak the tax, it hasn’t worked. Kill it. Put a stake through its heart. Don’t let it come back.”
He said Senate Bill 76 would eliminate school property taxes and replace those taxes with a combination of funding from the personal income tax and the sales and use tax. The personal income tax would be raised from 3.07 to 4.34 percent. Sales items on more items would increase from 6 to 7 percent. “That is the guts of the bill. It also has a cost of living built into it, so that every year, school districts would get a little bit more depending on either the statewide average weekly wage or the increase in sales tax, whichever is less.”
“When we first put it in, we had 13 co-sponsors, not bad but you need 26 votes to get something out of the Senate. This last session we were up to 24… we believe we have the bare majority to get this bill through the Senate, and that would be the first time in history,” said Argall. “That then puts some increased pressure on the House.”
Schwank agreed that Senate Bill 76 will likely pass through Senate.
“Let’s fix it. Let’s quite putzing around with this. People have waited long enough. Let’s get it done,” said Schwank.
Chamber members wanted to know what they can do to help get the bill through.
“Continue to reach out to us, to the Governor and talk about the issues that matter to you as business people,” said Schwank. “This is a tax shift, the money has to come form somewhere and we do have to fund our schools; it’s just can we do it in a fairer way because people are at the breaking point on this issue. We have to resolve it.”
