Letter to the Editor: Support House Bill 1776

On Nov. 9, I attended an informational tax forum in Finleyville. The topic for the evening was the House bill 1776. State Representatives Jim Cox, R-Berks County, and Rick Saccone, R-Elizabeth, are proposing bill 1776 to get rid of school taxes based on millage and replace them with a combination of sales tax + income tax. This proposed bill has something that was absent from all other school funding bills ever created: spending controls for school boards. 

A chief proponent of the bill, David Baldinger, head of the Pennsylvania Coalition of Taxpayer Associations, presented and defended the logic behind this bill. You can find more info at http://ptcc.us.

The story starts simply by analyzing what has been done in the last couple of decades. What we find is that we have had many prior "tax relief" and "casino money" strategies that end up being no relief at all for homeowners. A $200 "relief" is quickly nullified within a couple of years with just the usual tax increases.

This replacement tax defined in bill 1776 means no more school tax liens on your homes, no more "tax sales," no more selling a piece of the family farm to pay taxes. 

The current tax rules based on property assessment value have many problems. Unfairness is provably rampant for property assessments across the state of Pennsylvania. Property assessment is more art than science it seems, since a large number of cases are won by the people and companies who challenge their assessments.

In addition, based on recent legal decisions in cases like the rulings against Allegheny County, it appears that counties using property values must re-assess every 4 years at an average cost between $1 million and $3 million per year depending on the size and complexity of the county's tax base. This is a huge overhead cost. And they lose court cases often defending these assessments in court, so you can factor an extra cost on top of that first $3 million.

Today, we have school property taxes that are turning home ownership into a twisted rental agreement. If you don't pay then we kick you out and we take your house. Your house really isn’t yours in this scenario, is it? In almost all districts, school taxes are increasing much faster than inflation, and in a few years you won't be able to give your house away if nothing is done very soon. This is already true in many areas of Pennsylvania where homes at the median sale price of $200,000 have property tax burdens of $10,000 or more annually. This makes these homes almost impossible to sell and is destroying the real estate market in these areas.

The big change in this new tax replacement proposal is that instead of paying taxes once every 12 months, you will pay taxes every paycheck with a state income tax of 3.99 percent and a sales tax on pretty much every single thing you purchase. There would be some exclusions like medical services, prescription medicines and devices. There are a few other limited exceptions. But school taxes on your house are gone. And there is no school tax on corporations and businesses.

Some might say “Hey, wait a minute, businesses should pay.” Actually, they should not and here’s why.

First of all, when they pay, they simply charge it back to the customers, so you end up paying higher prices. Second, we have recent proof that commercial assessments are as much guesswork as it is for your home, and huge problems arise when taxes are reviewed and school boards end up owing back millions of dollars. This type of financial disaster almost destroyed a Philadelphia school district in June 2011 when Glaxo-Smith-Kline (GSK) won it’s multi-million dollar tax appeal.

Another example, although not the result of a lawsuit, Westinghouse’s decision to move to the North Hills in 2009 set the school district in Monroeville back millions in lost future revenue. Third, if all businesses know that they don’t have to deal with costly assessments and school taxes, they will be able to create more jobs in Pennsylvania. We finally we get a tax break for all businesses including small business, the real job creators in our economy, and we’re not borrowing any money to do it!!

The change of taxation strategy also comes with changes on how school budgets are made. The law says schools must work within the money given. School boards that are accustomed to raise taxes to "fit the plan" would find that the old ways are no longer acceptable. Tax revenue should also be more stable with less overhead costs for property assessment and litigation. 

The unfair situation of overtaxed citizens in Peters Township where the school district has accumulated over $10 million in various accounts should never happen with this law in place. The change still allows for special local taxes for duration of 4 years after successful referendum. These can only be renewed for 4 years by a new referendum.

The fairness of this new taxation avoids the assessment problem and the legal tangles that result from the recent Allegheny County ruling. The fairness is that 100 percent of citizens pay, proportional to their means. You earn less therefore you spend less and you also pay less. The fairness is that illegal aliens and people working for cash will at least pay the sales tax even if the state can’t find a way to force them to pay the payroll tax. The fairness is that schools will have a dependable and predictable source of revenue.

I have heard criticisms of this tax plan but the best part for me is the spending controls, and the sooner we apply these the better off Pennsylvania will be. Your business and your job will not be threatened by a rogue school budget that increases taxes at twice the inflation rate. You will no longer have to worry about losing your house or selling off a piece of the family farm to pay for school taxes. Your business can afford to hire staff and buy more equipment and expand because you don’t have to write that huge school tax check any more.

This tax plan is unlike any other tax plan before. It will help to ensure that your home—your American dream—will always be yours. Call your congressmen and tell them to support PA House bill 1776, and save the American dream.

-Eric Rouillard, Peters resident