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Senate Co-Sponsorship Memoranda
Senate of Pennsylvania
Session of 2013 - 2014
Regular Session
MEMORANDUM
| Posted: | January 30, 2013 10:55 AM |
|---|---|
| From: | Senator John P. Blake |
| To: | All Senate members |
| Subject: | Property Tax Relief – Optional County Sales Tax |
I will soon be re-introducing a modified version of Senate Bill 1502 from the 2011-2012 Session. The proposal is intended to reduce local reliance on property taxes by diversifying local sources of tax revenue and to mitigate the prospect for significant, property tax increases in many of our counties and municipalities. Counties will have the option of increasing the sales, use and occupancy tax by 1%, from the current 6% to 7%. Any and all incremental sales tax revenue generated as a result of this 1% increase will be apportioned to municipalities within said counties according to a specific revenue-sharing formula. Should an eligible county opt not to levy an increase, the sales tax increase may still be levied in said county if local municipal governments representing 60% of the county’s population adopt ordinances that petition the county to levy the sales tax increase. In this latter case, only those municipalities that, by ordinance, petition the county for a sales tax levy are eligible for a share of the incremental tax revenue generated by the increase. First and second class counties are excluded from the bill as state law already permits Allegheny County to levy an additional 1% and Philadelphia to levy an additional 2% sales tax for use within those jurisdictions. Any incremental sales tax funds resulting from counties opting to levy it would be collected by the Department of Revenue and re-distributed by the Treasurer back to these counties – and to the participating municipalities therein – according to the following formula:
The impetus for this legislation is clear: too many of our counties and municipalities are in serious fiscal distress and they are too reliant on property taxes to meet the rising costs of providing basic services to their citizens. Conservative legislators and interest groups have for many years touted the outright elimination of property taxes in favor of a sales tax to support public education. While my proposed legislation does not relate to school districts and while I do not support such a radical change regarding the manner in which we fund public education – the tax base for our counties, cities and municipalities is in common with our local school districts and increases in property taxes by any of these taxing authorities is punitive to the fixed income property owners who comprise that same tax base. My legislation will address property tax relief for two of these three taxing authorities – county and municipal. There is ample evidence that heavy property tax burdens throughout the state threaten the quality of life for our seniors and undermine the economic vitality of our small cities. We do a tremendous disservice to local taxpayers by failing to change the current, obsolete constraints on local governments that prevent them from diversifying local revenue streams. Local governments at the county and municipal level have appealed to the General Assembly for years that they be permitted to transition to tax revenues based upon one’s ability to pay or based upon consumer spending decisions. The City of Pittsburgh and the City of Philadelphia have already been permitted to levy local sales taxes and these local revenues have contributed significantly to an improved fiscal status of these cities. Further, there is little evidence that these local sales tax levies have had significant adverse impact on consumer spending tendencies or on private investment in these cities. It certainly raises questions of fairness when our two largest cities are permitted to diversify their tax revenues and benefit from a reasonable predictability of fiscal performance relating to that revenue diversity when the balance of the state – and particularly counties with struggling third class cities – cannot do the same. During the 2011-2012 Session, joint hearings were held by the Senate and House Local Government Committees; the Senate Community, Economic and Recreational Development Committee and the House Urban Affairs Committee on Act 47 and fiscally distressed counties and municipalities. A review of the testimony at these hearings reveals broad consensus and near unanimous support for greater diversification of local government tax revenues not only from local government officials and their respective professional associations but from labor, academia, as well as from independent legal and private business interests. These joint hearings also revealed the attributes of our third class cities throughout the state that have contributed to their current fiscal distress – such as the preponderance of 30 to 40 percent tax exempt property within their municipal borders. Reliance on property taxes only perpetuates municipal fiscal distress by imposing a greater tax burden on those least able to absorb property tax increases while stifling private investment and commercial/industrial development in our core business districts. Based upon the most recent data from DCED there are at least seventeen counties statewide with an Act 47 fiscally distressed community or with communities participating in the Early Intervention Program – communities trying to stave off fiscal distress. There is little question that this number will increase going forward and the urgency to bring local taxation methods into the 21st century to enable struggling counties and municipalities to deal with 21st century fiscal challenges is greater than ever. What is paramount however is the fiscal distress experienced by our local taxpayers who are trapped in an antiquated system of revenue generation that relies almost entirely on property taxes. Last session’s co-sponsors included Senators: Alloway, Ferlo, Fontana, Schwank and Solobay. If you have questions about this legislation, please contact Kyle Mullins of my staff at 717-787-6481 or kmullins@pasenate.com. |
Introduced as SB458