Philly Deals: No more school property taxes?

State Rep. Thomas Caltagirone is a cosponsor of the proposed Property Tax Independence Act for Pennsylvania. JASON MINICK / Associated Press
State Rep. Thomas Caltagirone is a cosponsor of the proposed Property Tax Independence Act for Pennsylvania. JASON MINICK / Associated Press
Posted: April 01, 2012

On Monday, Pennsylvania legislators from both parties will step up a campaign to kill your local school property taxes.

Instead, they want to finance public schools - local government's major expense - through higher sales and income taxes, routed through Harrisburg.

State Reps. Jim Cox, a Republican who represents towns west of Reading, and Thomas Caltagirone, a Democrat from Reading, plan to roll out a "Property Tax Independence Act" that would replace school property taxes - and gross-receipts, business-privilege, earned-income, and other local taxes used to fund schools - with 1 percent boosts to Pennsylvania's personal income tax, currently 3.1 percent, and its sales tax, currently 6 percent in most places, 8 percent in Philadelphia.

Caltagirone, in Philadelphia on Friday for a prison-overhaul hearing, told me he has 20 cosponsors among his fellow Democrats in the 203-seat state House. "I think I'll pick up a few more," he said. Cox told me he has more than 30 Republicans signed on so far.

The proposal would put most legal and medical services (for consumers), sports events, insurance, television, dry cleaning, clothing over $50, vending machines, textbooks, truck, bus and airline transportation, and horses, among other things, under the sales tax. Even newspapers. Unprocessed food, prescription drugs, and cheap clothes would still be exempt.

That promises savings for Pennsylvania's many elderly voters who don't want to sell their homes, and would make the state a cheaper residential alternative than others in the Northeast.

The proposal could also ease some really embarrassing political problems in Pennsylvania's politically constipated cities, such as Philadelphia, which is resisting pressure to update records and tax properties based on what they are really worth, and Harrisburg, where state-appointed finance czar David Unkovic, who resigned Friday after calling for a federal investigation of city bond deals, has noted that even massive financial reorganization may not fix a city with so little taxable property and so many poor children dependent on it to fund their education.

Even if the bill passed, Philadelphia would still have to reassess and tax its properties to pay nonschool expenses, Sam Katz, chairman of the city's state financial oversight board, told me. Still, "this is a good conversation for us to be having. I don't know, but it may provide more stable revenues for the schools."

Would this scheme reallocate money from rich taxpayers to schools in poor neighborhoods? Or lock in current inequality?

According to Cox's summary of the proposal, the law would "fund the districts at their current per-pupil level" unless taxpayers voted an additional local income tax for school construction.

Pennsylvania's bloated legislature has sunk other bold tax changes. Caltagirone said it had been a special challenge keeping Philadelphia Democrats on board. Rep. Michael McGeehan signed on, but colleagues Angel Cruz and Rosita Youngbloodtook their names off "when they started taking heat" over higher sales taxes, he said.

"We can't afford that. We're already paying 8 percent" sales tax, Youngblood told me. She also expects the bill will be rewritten so Philadelphia doesn't get the full benefit of the property-tax cut.

"The big problem is, you have the organized professions - attorneys, real estate agents, insurance, funeral directors, CPAs - their services would be included," Caltagirone said. "They will unite against us. They could hammer the hell out of us."

"I don't believe that's a deal-killer," Cox told me. "I can't say the bar association or the medical society is going to embrace this. But when I talk to individual attorneys, to doctors, they do the math very quickly" and realize an additional 1 percent tax on each $1 million of income would be canceled by the $10,000 a year the owner of, say, a fancy Gladwyne home won't have to pay Lower Merion schools anymore. Add in the benefit from canceling their tax on office and investment property, and "they don't have a problem with it, ultimately."

"This is pretty dramatic," Joseph C. Bright, a veteran tax lawyer at Cozen O'Connor, told me. But he questioned the wisdom of relying too much on sales and income taxes for long-term funding: They're even "more sensitive to the economy than real estate."

Contact columnist Joseph N. DiStefano at 215-854-5194 or JoeD@phillynews.com, or follow on Twitter @PhillyJoeD.

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