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Property Tax Reform in Pennsylvania. for the South Central Assembly Feb. 20, 2013 David W. Davare, Ph.D. Property Tax. Current system Revenue and importance Limitations and special issues Tax levy methodology Assessment issues Reform and related issues. Used by. Used by.
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Property Tax Reform in Pennsylvania for the South Central Assembly Feb. 20, 2013 David W. Davare, Ph.D.
Property Tax • Current system • Revenue and importance • Limitations and special issues • Tax levy methodology • Assessment issues • Reform and related issues
Property tax revenue Total RE Tax $14,276,773,785 2010 Taxable Income $310,368,447,000 PIT at 4.59% + 3.07% or 7.67% 2010 Taxable Wages $245,629,659,000 EIT at 5.81%
Property tax limits 2nd Class A Counties, 30 mills 2nd, 3rd to 8th class Counties, 25 mills 3rd Class Cities 25 mills Boroughs, 30 mills 1st class townships, 30 mills 2nd class townships, 14 mills Home Rule Governed by their charter School districts 25 mills excludes salaries, benefits and debt
Property tax limits • For 3rd to 8th class counties, Cities, Boroughs and Townships, an additional 5 mills may be imposed with the approval of the county court. • Codes authorize various special purpose levies for debt service, capital projects, fire hydrants, street lights, libraries, etc.
Pa Constitution • Article VIII Section 1: Uniformity of taxation • All taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws.
Exceptions to taxation • Tax exempt properties • Act 319 Clean & Green • LERTA/TIF/KOZ-KOEZ • Homestead/Farmstead (Act 50/72/1)
Tax reform attempts • 1988-89 Casey plan • 1996 – Act 50 • 2004 – Act 72 • 2006 – Act 1
Tax reform attempts • All shift from property to income. • Both earned and personal income • Act 72 and Act 1 included homestead/farmstead exclusions • Act 72 and Act 1 opened homestead/farmstead to municipals as well as Schools
Property tax calculation Assessed value * millage * collection rate = Revenue
Assessment of property • No state mandates on assessment • No required reassessment • Third class cities can do own assessment (Reading) • Assessment my use either price, or replacement value
Assessment of property • Assessment my use either • purchase price or • replacement value • Assessing county selects base year • County establishes pre-determined ratio (market to assessed)
Assessment of property Land value taxation has limited authority in PA May be used by 3rd class cities and 3rd class school districts that are co-terminus with 3rd class cities
Assessment of property Government entities situated in 2 or more counties must equalize using STEB estimates of market value.
Tax reform proposals have • Only address where local dollars come from. • Do not address demands and limitations • Shifting from property to income, without consideration of commercial property tax revenue • Shift the business tax burden to individuals. • Failed to consider appropriate mix of taxes
Tax reform proposals have • Increased property taxes by repealing alternative taxes available under Act 511 • Encouraged increased rate on earned income. • Left personal income to local choice • Most proposals expand disparity of wealth as defined by property and income • Require a “one-size-fits-all” approach to local tax reform.
Tax reform proposals should • Include state funding as part of the debate. • Include an appropriate mix of taxes • Require counties to maintain a uniform state-wide ratio of assessed to market value • Require uniform assessment practices • Require the regular reassessment of real estate at stated intervals • Fully fund mandates on local governments
Tax reform proposals should • Provide state-wide support for assessment of specialty property (utility production facilities) • Supplement tax reduction/abatement programs such as Act 319 (no local choice)
