House Bill 76 - Property Tax Independence Act Co-sponsorship Memo
From Representative Jim Cox and Representative Rosemary Brown, Representative Tina Davis, Representative Jaret Gibbons, Representative Rob Kauffman, Representative Tim Mahoney, Representative Gerald Mullery, Representative Thomas Quigley, Representative Mark Rozzi, Representative Rick Saccone  
To: All House members  
Subject: Property Tax Independence Act - HB 76  
Memo: In the near future, we will be re-introducing the Property Tax Independence Act - House Bill 76. Last session, 87 House members joined us in co-sponsoring legislation to address one of the most vexing issues in our Commonwealth – the school property tax.

Upon the suggestion of our House Leadership and other members, we have been working closely with the Majority Leader’s staff to ensure that many of the concerns raised in the prior two sessions are addressed. It has been very helpful to have their assistance in making these changes to the bill. The core of the bill will remain the same as we seek to address a very critical issue for many across the Commonwealth.

The Property Tax Independence Act will eliminate all school property taxes across the Commonwealth (with the exception of those retained to retire current debt) and will replace those taxes with funding from the Personal Income Tax and the Sales & Use Tax. The legislation utilizes the current sales tax mechanism to fund schools, restoring the original intent of the 1953 “Education Sales Tax.”

The Property Tax Independence Act’s revenue replacement mechanism moderately broadens the base of the state sales tax to include more services and products at a new rate. Pennsylvania currently has one of the narrowest sales tax bases in the nation and broadening of the base is a powerful key to adequate revenue generation. Life necessities and business-to-business transactions will continue to be exempt from the sales tax.

While the sales tax generates almost two-thirds of The Property Tax Independence Act’s revenue, the remainder of the funding necessary to replace the school property tax is generated by a modest increase in the state personal income tax.

These two taxes provide a predictable and stable funding source that automatically increases revenue in sync with economic growth. This is in clear contrast to the school property tax which is not based on economic growth but is subject to much variation, forcing annual increases to increase revenue. Unlike the property tax that has no relationship to family income, both the sales tax and the personal income tax are directly tied to a person’s ability to pay.

School property tax elimination will be accomplished via a two year phase-out of the tax. In the first fiscal year after enactment, school property taxes will be frozen at their current level; in the second year they will be completely eliminated except for a small portion that will be retained in each school district to retire the individual district’s outstanding long-term debt.

The Property Tax Independence Act works to fully fund all Pennsylvania schools at their current levels. All local school property taxes that are eliminated will be replaced dollar-for-dollar in each district with no arcane formulas that redistribute wealth.

In addition, The Property Tax Independence Act permits local school boards to enact a local earned income tax or local personal income tax for major projects such as new school construction. Enactment of either of those local taxes would be subject to a direct taxpayer referendum.

It is important to note that The Property Tax Independence Act imposes NO new mandates of any kind on Pennsylvania school districts. The plan simply provides replacement funding. This funding may then be used in any manner the school district deems necessary. The Property Tax Independence Act does not interfere in any manner with these local school district decisions.

Through its enactment, this legislation can serve not only to remove an oppressive burden from Pennsylvania homeowners but can also have positive, far-reaching effects on Pennsylvania’s schools, business climate, job growth, and our Commonwealth’s economy in general.

Please join us as a co-sponsor of the Property Tax Independence Act.