State Rep. Frank Ryan nicely summarized the fundamental problem Thursday as he introduced his latest plan to eliminate widely hated school property taxes.
”Everybody wants to get rid of property taxes as long as the other person is the one who is going to pay the replacement tax,” the Lebanon County Republican said. “It is clear that any solution will require sacrifice on the part of all Pennsylvanians.”
That’s for sure. The $16 billion that property owners pay in school taxes covers 53% of education funding. Pennsylvania’s government contributes 36% and the federal government contributes 11%.
To eliminate local property taxes, the state government would have to come up with $16 billion beyond its current $8 billion-plus contribution. That would require a new state tax structure.
Ryan’s most recent proposal includes a 60% increase in the state income tax rate, from 3.07% to 4.92%. It also would include a boxcar of political dynamite — applying that rate to some types of retirement income. Pennsylvania is one of six states that does not tax any retirement income — one reason that the state has a huge population of retirees. Social Security income would be exempt, along with military and disability pensions.
Ryan also proposes increasing the state sales tax rate by 33%, from 6% to 8%. It would, in effect, be more expansive in that the additional 2% rate would be applied to currently exempt items such as clothing and food. The new 2% portion would be distributed to counties to pass on to local school districts.
The fundamental flaw in Ryan’s approach is that it would eliminate, rather than reduce, property taxes. The state formula would be fixed while school costs are not. As their unwillingness to take more responsibility for school funding already proves, state lawmakers aren’t likely to raise state taxes to keep up with school costs. Further proof is that, the last time Ryan took a shot at reform property taxes accounted for $14 billion, rather than the current $16 billion of school funding.
State lawmakers should take a long-term approach, pursuing major property tax reductions without eliminating the property tax to ensure adequate education funding. And to make it happen, it’s obvious that some tax on retirement funds has to be part of the mix.
— The Citizens’ Voice, Wilkes-Barre (TNS)
