Published: May 02, 2008 01:15 pm            

Fight for property tax reform: Pendulum may be swinging

For all their centuries of trying, lawmakers have not solved what has been called “The Tax Problem.”

Will Rogers, the American humorist, once said, “People want just taxes more than they want lower taxes. They want to know that every person is paying his proportionate share according to his wealth.”

This issue of fairness or “equity” in taxation still produces strong debate and leaves opinions sharply divided on how best to reconcile personal and political differences over the subject of equitable taxation.

While the discussions may be enduring, significant attempts at local tax reform in recent memory have been unusually short-lived and produce little, if any, meaningful change.

No wonder, then, that taxpayers are upset that this may be nothing more than just political rhetoric.

But, there is hope now that the wheels of tax reform may finally be rolling forward. In 2006, the Pennsylvania Legislature passed Act 1 with provisions to provide property tax relief for eligible homestead and farmstead owners through new gaming revenues.

Act 1 also gave Pennsylvania taxpayers greater control in approving hefty school-tax increases that exceeded a cost-of-living cap on any new school millage boosts.

Nonetheless, the law provided that a school district could petition the Department of Education that such an extraordinary tax increase was justified due to emergencies and educational necessities. If disapproved by the education department, the district’s only recourse was to seek approval through a voter referendum, or to cut expenditures to balance its budget.

Recognizing the backlash of discontent to further tax hikes, school boards may have already sensed that residents voted with their pocketbooks. Furthermore, given that only a minority of voters still have children attending public school, and that local taxpayers view school budgets as already too bloated and out of control, approval of a referendum to raise millage beyond the cap may give taxpayers the chance they have been waiting for to have the last word.

The crux of the problem may lie in an examination of local revenues or tax dollars continuing to lag far behind expenditures.

This problem is further exacerbated in many rural districts that have experienced marginal new growth in real property coupled with a decline or stagnant population (taxpayers).

This inelasticity or unresponsiveness to changing economic growth patterns has by necessity forced school boards to increase taxes each year to meet operating expenses.

Compounded by the No Child Left Behind federal mandates, school districts are challenged to operate within tight budgetary constraints due to limited or diminished revenues. At the same time, the plight of county and local municipal governments cannot be ignored as they are part of the same economic scenario.

As the “bite” of local taxes is felt, the public awareness in the fair administration of the tax structure is heightened. It now seems clear that the property tax will have to stand closer, intense public scrutiny.

Perhaps stronger signals from their constituents for true tax reform will pressure state legislators to change the system. Every year in Harrisburg, taxpayers and officials hear of the need for and the attempts to achieve local tax reform. Yet, while everyone is in favor of reform, substantive change has rarely occurred because one size or local tax model does not fit all economic circumstances as it relates to the mix of taxes needed to fund school districts across the commonwealth.

Taxes and tax reform are emotional issues, and emotions can overshadow fact and rational thinking. Without a developed consensus for compromise and flexibility, however, reform may continue to be a process similar to that of the past where it takes on a “bits and pieces” approach to a rather global and comprehensive problem.

The demand by citizens and taxpayers alike for increased services, coupled with a demand for lower taxes, may well precipitate a crisis which, if not resolved by the Legislature, may spill over into the courts.

The list from which future crises could emerge is virtually limitless. Given any eventuality, there will no doubt be some forthcoming action on the part of the General Assembly.

Yet, such reaction may be more symbolic than substantive and could well perpetuate the present inequities in the local tax structure.

No doubt the citizens and taxpayers will be waiting on the sidelines and watching the “scoreboard.”



David A. Knepper of Adams Township has held several professional positions: Cambria County community and economic development specialist, school superintendent, principal and college teacher. He holds a doctorate in educational administration from Penn State. Presently, he is executive director of the Forest Hills Regional Alliance.

        

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