Pa. lawmakers debate cutting school taxes

January 28, 2008 6:26:30 PM PST
Debate on a bill that would lower school property taxes for Pennsylvania homeowners began ever so slowly Monday, with five hours of discussion on the first of dozens of amendments to be considered.

The state House of Representatives is looking for ways to lessen the multibillion-dollar burden of school property taxes beyond the tax cuts that are anticipated from the slot-machine gambling revenue currently pouring into state coffers.

"That which we are about to undertake in this House tonight and in the next day or two perhaps is very, very likely the most important issue that we, as a House, have debated," said Rep. Sam Rohrer, R-Berks. "And it's probably one of the most, in some respects, complex. On the other hand it really is rather simple."

Discussion began with Rohrer's proposal to fully eliminate school property taxes by vastly broadening the sales tax by $5.9 billion a year and boosting personal income taxes by $3.2 billion a year.

Rep. David Levdansky, D-Allegheny, predicted Rohrer's plan would, within a few years, saddle the state with $17 billion a year in payments for public education and force it to assume $24 billion in long-term debt from the state's 501 local districts.

"This amendment, if adopted, clearly would be the largest shift and the largest increase in state taxes," Levdansky said. "It would be a 25 percent increase in the state personal income tax alone."

The list of items that would be newly subject to the sales tax under Rohrer's plan includes telegrams, dry cleaning, pay phones, bibles, newspapers, candy, gum and such services as bank transactions and child care. People, but not businesses, would also start paying sales taxes on legal fees, accounting bills, engineering costs and some other services.

Levdansky warned lawmakers that the dramatic change envisioned by Rohrer's amendment would bring unintended negative consequences.

"I'm telling you that you could find dozens and dozens and dozens of things in here that one day you're going to find out that you voted to make subject to the sales-and-use tax, and you're going to regret that," Levdansky said.

Rep. Bryan Cutler, R-Lancaster, outlined a list of problems with Rohrer's amendment, For instance, he said, the bill was not written clearly, and would create a complicated tax shift that would be difficult to implement.

"The problem needs fixed, but it needs fixed correctly," Cutler said.

Levdansky, chairman of the House Finance Committee, is sponsor of the bill Rohrer's amendment would gut and replace. Levdansky's bill would add a half-percent to the state sales tax - currently 6 percent in most parts of the state - and increase the personal income tax by 0.22 percent, to 3.29 percent.

The House has to consider all amendments before a final vote on legislation can occur. The House was scheduled to come in early Tuesday and resume consideration of Rohrer's amendment.

Any property tax bill that makes it out of the House will face an uncertain fate in the Senate. House Minority Leader Bill DeWeese, D-Greene, said he sensed less enthusiasm for changing the property tax structure among leaders of the GOP-controlled Senate.

Erik Arneson, spokesman for Senate Majority Leader Dominic F. Pileggi, R-Delaware, said the upper chamber will review whatever the House may pass but senators are more interested in a cost-control approach to lessening school taxes.

"Without effective cost controls, any other effort could evaporate in a matter of years as school taxes continue to rise," he said.

Earlier this month, the House took the first step toward removing from the state constitution a provision that limits how much of residential property taxes the Legislature can eliminate. The measure would keep taxes in place for businesses and other commercial properties.

Officials say it would cost the state about $5.5 billion to eliminate property taxes for primary residences and farms, and another $5 billion to eliminate all property taxes. The current constitutional provision limits any reduction in residential property taxes to half the median assessed value of homes within a given taxing jurisdiction.

Most of the state's share of revenues from Pennsylvania's nascent slots gambling industry - an estimated $1 billion a year - is already earmarked for reductions in homeowners' property taxes and Philadelphia's wage tax, starting with the 2008-09 fiscal year.