Pennsylvania State Budget
Lawmakers and Gov. Wolf should approve emergency funding to keep Pennsylvania’s most vulnerable residents from suffering needlessly over the holidays.
After nearly five months of gridlock, a new state budget framework was announced this week. At this point, it’s tempting to call any progress on budget agreement a victory, but is this tentative framework truly a “win” for Pennsylvanians?
Pennsylvanians may soon pay more for nearly everything they buy. Under the latest proposed budget deal, state sales taxes would jump from 6 percent to 7.25 percent—giving Pennsylvania the second-highest statewide sales tax in the nation.
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Turns out, lawmakers weren’t too keen on giving Pennsylvania the second highest state sales tax rate in the country. And legislators didn’t like Gov. Wolf’s ideas for wealth redistribution via “property tax relief.”
This is the fourth tax hike proposal put forward by Gov. Wolf that has fallen apart, gaining little support even from his own party.
The governor, and some lawmakers, must recognize the simple reality: No one wants to pay more in taxes.
Before any more is asked of taxpayers, here's how lawmakers should prioritize:
Among the many questions in a tentative state budget deal is how revenue from the sales tax increase would be distributed. The Associated Press notes this will be a major source of contention should the plan pass.
Under a formula initially proposed by Wolf, Philadelphia would get 14 percent of the money; under the House GOP plan, it got 5 percent. Under Wolf's plan, wealthy Lower Merion would get less than 1 percent; the House GOP plan would give it almost three times as much.
Last Thursday, Gov. Wolf said he wants to see "a progressive formula to distribute the resulting property tax reductions."
While we don’t yet know what the new formula might look like, we can look at how the $616 million in slot machine revenue is currently distributed.
Overall, slot machine revenue for property tax relief yields $222 per homeowner. This varies widely by school district—from $46 per homeowner in Bryn Athyn school district to $653 per homeowner in Chester-Upland.
Most districts (376 or 75 percent), however, receive less than the average $222 per homeowner.
Meanwhile, Philadelphia’s revenue—$86 million or 15 percent of the total—is dedicated to reducing the city wage tax rather than property taxes.
This redistribution—along with school tax increases—shows why most homeowners are disappointed. They’ve never seen the promised tax relief from gambling.
The table below shows the top 10 and bottom 10 current recipients, per homeowner.
|Property Tax Relief By District|
State Property Tax Reduction Allocation
|Estimated Tax Relief per Homestead and Farmstead|
|Allentown City SD||Lehigh||$9,639,281.38||16,948||$569|
|York City SD||York||$2,901,801.73||5,473||$530|
|Pleasant Valley SD||Monroe||$4,069,921.61||8,604||$473|
|William Penn SD||Delaware||$3,404,197.02||7,380||$461|
|Cheltenham Township SD||Montgomery||$3,609,813.90||8,062||$448|
|Harrisburg City SD||Dauphin||$2,774,667.62||6,331||$438|
|Mid Valley SD||Lackawanna||$261,188.73||4,010||$65|
|Eastern Lancaster County SD||Lancaster||$446,237.91||6,857||$65|
|Saint Marys Area SD||Elk||$348,202.23||5,596||$62|
|Mars Area SD||Butler||$327,476.67||5,717||$57|
|Cumberland Valley SD||Cumberland||$916,543.69||16,489||$56|
|Palmyra Area SD||Lebanon||$342,742.08||6,572||$52|
|Bryn Athyn SD||Montgomery||$9,283.10||202||$46|
Promising property tax relief is one thing, but delivering real relief requires a fair formula and strict spending controls.
Rumors about a proposed budget continue to swirl in Harrisburg. One such rumor is that the deal would include an increase in the sales tax rate to be used for property tax relief.
One new idea under discussion could provide a cornerstone of the cash Wolf is seeking: diverting the roughly $600 million in slot-machine gambling receipts that school districts currently pass along to homeowners as property tax reductions. That stream of money would shift to the state treasury, while negotiators are discussing an increase in the state sales tax to offset reductions in local school property taxes, another concept that is important to Wolf to improve equity in school funding.
This may be sold as a “dollar-for-dollar tax shift,” but represents anything but. In reality it would be a $600 million tax increase on working families.
That is, if the plan were to increase the sales tax by $2 billion next year, property taxes would only be cut by $1.4 billion—with $600 million directed to new spending.
That’s a backdoor tax increase on working families.