Property Tax Reform Update
8/30/2019
By Rep. Steve Mentzer (R-Lititz)
Voters overwhelmingly approved a constitutional amendment to increase the allowable homestead and farmstead exclusion to 100% of the assessed value of all homesteads and farmsteads. If fully funded, this change would allow each school district to eliminate the collection of property taxes.

Since the passage of the constitutional amendment, there have been many discussions regarding the best way for the General Assembly to craft enabling legislation that would provide for the elimination of owner-occupied residential school property taxes via the homestead and farmstead exclusion. House Bill 1200, sponsored by Rep. Marcia Hahn (R-Northampton), is specifically drafted as enabling legislation. Funding would be provided by increasing the state Personal Income Tax (PIT) by 1.8% to cover the amount needed to offset owner-occupied residential school property taxes.

In addition to Rep. Hahn’s bill, Senate Bill 76, sponsored by state Sen. Dave Argall (R-Berks/Schuykill), and House Bill 13, sponsored by Rep. Frank Ryan (R-Lebanon), propose to eliminate property taxes by replacing them with a series of tax shifts to fund our schools.

SB 76, the Property Tax Independence Act would eliminate school property taxes by increasing the Personal Income Tax (PIT) from 3.07% to 4.95% and increasing and expanding the Sales and Use Tax (SUT) from 6% to 7%. These new revenue sources would replace dollar-for-dollar the revenues lost by the school property tax elimination. Also, under the bill any school district seeking to spend above the allotment from the state would have to ask the voters for their support in a referendum. School districts may locally increase the PIT or Earned Income Tax if approved by the voters in that district.

HB 13, the School Property Tax Elimination Act, would also eliminate school property taxes by shifting school funding costs to a series of expanded taxes. A local personal income tax of 1.85% which would be paid directly to the school district. A local sales tax of 2% would be added to existing items that are already taxed by the SUT and these taxes will be allocated to the school district in the county to which the sale took place. A local sales tax of 2% only would be added to food and clothing, but these items would not be subject to the current 6% SUT. Anyone receiving SNAP benefits or public assistance will be exempt from those taxes on food. Social Security would not be taxed. Retirement income would be taxed at a rate of 4.92% with 3.07% of that tax going to the state and 1.85% of the tax going to the school district. Seniors would save 75% of all the taxes that they currently pay.

Of the issues facing homeowners in the 97th Legislative District, ever increasing school property taxes are a major concern. I will work with my colleagues to achieve a sensible solution. In the meantime, I would like to get your feedback on the two pieces of proposed legislation. Please visit my website, repmentzer.com, and cast your vote for HB1200, SB 76 or HB 13.