Want To Eliminate Property Taxes? Why Not Let Taxpayers Decide?

For fifty years, serious proposals to reform, reduce, or eliminate property taxes have been paraded through the state Capitol. Variant in approach and details, these plans have one thing in common: None has come into being. This frustrating experience reinforces a hard truth – it is nearly impossible to make politics and finances square up in a specific plan.

Hating property taxes is easy. Devising a fiscally responsible and politically substitute is devilishly difficult. Complicating the debate is the bloc of taxpayers who want property taxes eliminated but not replaced. Great populist politics perhaps, but capsizing public education is not the path to a more prosperous Pennsylvania.

Next to property taxes, which one do taxpayers dislike most? The tax picked to replace the billions of dollars of property taxes now levied. The fundamental problem – erasing property taxes does not reduce the overall tax burden, but merely shifts it around, and might not even spread it around. The spending driving up taxes will continue to generate controversy and taxpayer unhappiness, even if property taxes are relegated to the museum of revenue generators.

Rising populism and new faces in the General Assembly arguably could result in landmark legislation passing this session. But since the lieutenant governor broke a Senate tie vote in the negative last session, a signature by Governor Wolf is far from assured. Especially since state taxes used to replace property taxes are no longer available to fill in state budget deficits.

Instead of running up the middle again, why not try some razzle-dazzle? This is not meant to devalue the current elimination proposal, which has undergone more than a decade of development, refinement, and assertive advocacy. Rather, it reflects the hazardous political minefield even the most thoughtful and well-constructed plan must traipse through.

The seeds for an alternative are found in two efforts attacking the property tax problem a generation ago. In 1989, the Casey tax plan effectively appeared on the primary ballot because it was tied to a proposed constitutional amendment for a homestead exemption. In January, passage looked sure-fire. In May, it was voted down by more than 3-1. Several missteps in constructing and selling the plan doomed it. But there remains value in letting the taxpayers make the choice based on specifics, rather than the “trust us” pitch.

In Michigan, legislation set a drop dead date for property taxes. The first replacement plan went down the tubes. So officials then had Michigan voters choose between two plans. Property taxes were back in the mix, but greatly reduced.

Why not combine the best aspects from these two efforts in a new Pennsylvania approach? Submit three options to voters in a referendum.

Option number one is a comprehensive plan for eliminating property taxes as a means of paying for education.

Option number two is a major reduction in property taxes.

Option number three is essentially the default mechanism, keeping the status quo, for those fearing the unknown tax consequences and those who congenitally mistrust anything crafted in Harrisburg.

In this way, plans can be constructed according to what will work functionally, rather than what it takes to secure legislative votes or a governor’s signature or to get around the obstacles posed by traditional opponents. There is no shortage of pieces and parts from fifty years of plans that can be used to assemble options one and two.

For example, in the elimination plan, the concern about tax breaks for commercial properties can be addressed. In the reduction plan, caps or referenda can be used to address concerns about property taxes rising again. The sales pitch then focuses on calculated impact rather than conjectured intentions.

Property tax plans are invariably accused of falling short of generating sufficient replacement revenue. When true, that is a serious defect. The cure in this case would be to have several independent analysts certify that options one and two do not contain a deficit, before they are debated and placed on the ballot.

The plans for eliminating or reducing property taxes will be complicated critters. So individuals and interest groups need ample time to chew them over and do their calculations about what change means for them and their communities. The Casey plan was picked apart in four months. Because this method requires some comparison shopping between competing options, there should be at least a six-month interval between the public presentation of the plans and the vote.

When to time a vote? Candidates for public office running in primaries and general elections will be legitimately worried about getting their elections tangled with this intensely emotional subject. So do it as a special statewide election. Pick a time, say September, when there are fewer potential hurdles to voter turnout.

This approach is certainly more intriguing than merely convening another special session of the legislature, which tends to let out steam rather than build pressure and momentum.

The conventional wisdom has taken a pounding in recent years, as taxpayer demands for change grow more insistent. At the same time, the raging arguments over Obamacare, and the exclusionary, borderline imperial manner in which it was developed, approved, and implemented, further eroded confidence in government generated solutions on consequential pocketbook matters.

So why not pull the people into the decisionmaking on the Holy Grail of Pennsylvania politics – a long-sought remedy for rampaging dislike of property taxes?

David A. Atkinson is an Associate with The Susquehanna Valley Center.

Nothing contained here should be considered as an attempt to aid or hinder the passage of any legislation before the General Assembly.

The views expressed here are those of the author and not necessarily those of The Susquehanna Valley Center.