By Doc Clements
Representative Ryan is again dusting off PA House Bill 16, legislation to eliminate school taxes. Lord knows school taxes have been increasing yearly and it makes home ownership for low-income families and the elderly difficult. We have heard that Harrisburg was working on school tax relief for, at least, the past ten years and several flawed bills have been proposed. I agree wholeheartedly that we must do something about the skyrocketing school tax issue but at what cost?
No discussion of school taxes can be had without a close look at the cause for their increase. Twenty-five years ago, the state provided 36% of the cost of education from income taxes. Today, the state funds only 18% of the cost of education and the balance must be made up by school districts through school taxes. Why has the states percentage of funding declined so dramatically? The state is deep in debt to the tune of 68 billion dollars as a result of pension issues.
In 2004, the legislator stopped funding the Pennsylvania State Employees Retirement System (SERS) and used the money for other projects. The legislators and state employees were getting a free pension but, unfortunately, with hard economic times the pension fund rapidly fell into debt. Debt that was allowed to accumulate over twenty-five years and amass to 68 billion dollars. I personally find it mind boggling and malfeasant that it went on for twenty-five years. I further find it an enigma that voters would return these same people to Harrisburg religiously to compound the debt. Obviously, the first line item in the yearly budget is debt and this takes a big bite out of the taxes collected.
HB-16 proposes that we replace school taxes with a new tax structure to fund education. Replacing or lowering school taxes is an excellent goal, if the methods used are fair and distributed equally. This bill does not meet that standard. It proposes a 2% local sales tax increase which proponents say will generate 80% of the 11 billion dollars needed. Sales taxes would now be placed on food and clothing. The remaining 20 % would result from the addition of a 4.9 % tax placed on retirement income savings of senior citizens. 410k’s and the like would be taxed to generate 2.5 billion dollars. (Social Security and some pensions would not be taxed like the big military pension Ryan receives).
The first flaw in this bill is the 2% increase in sales tax, which I see as a burden on the low-income fixed income earners. Trading school taxes for taxes on necessities makes little sense if the trades result in hardships. Think of all the things you pay sales tax on and add in clothing and food. Is that a saving in your yearly expenditures? I think not. A family of four could, in fact, accrue more in sales taxes then they would pay in school taxes
Switching the burden of education to senior citizen retirement savings is outright ridiculous. They were promised tax free savings if they put a portion of their pay in retirement funds. Now politicians who have gotten themselves in deep financial debt want to renege on that promise and get their hands on savings that seniors put away over a lifetime of work. Couple the new 2 % sales tax with the 4.9 % retirement savings tax and seniors will be hit with a 6.9% tax increase! I’d bet when you do the math, they would prefer to pay school taxes.
Eliminating school taxes sounds glorious but when we do that, all businesses that own real estate pay NO school taxes. So, wait is this bill about keeping seniors in their homes or a BIG TAX CUT for businesses? I think we have seen Harrisburg gift big business major tax breaks on the backs of taxpayers in the past. The line they use is it’s good for the state. How much of that casino or gas money has the state really seen? I do know it’s been good for some campaign funds.
We can fix the school funding problem without financial voodoo. A progressive tax could be one answer. Yes, we would need to change the constitution but if we can do it to curtail the governor, it can be done to fix tax issues. Further, we need to make legislators begin to share in the cost of retirement. That new $5000 yearly raise they put in place along with the automatic pension increase needs to be rolled back. Because they ignored the ballooning debt issue for twenty-five years, I think they should have to ask the voters to raise their pay.
HB-16 is a bad bill. If you look at it closely it’s a bait and switch and a mega gift to the business community. We can do better.