Rep. Frank Ryan, R-Palmyra, answered calls from citizens this week about his proposal to eliminate school property taxes for Pennsylvanians, cautioning them that something needs to be done to prevent future problems with the commonwealth’s finances.
Ryan’s bill would replace about $15.2 billion collected for school property taxes with new taxes that include:
• A personal income tax of 1.85 percent that would be paid to local school districts.
• A local tax of 2 percent that would be added to items currently subject to sales and use tax (SUT). These taxes would also go directly to the school district.
• A local sales tax of 2 percent added to food and clothing. The items would not be subject to the current SUT, and anyone receiving help from the Supplemental Nutrition Assistance Program would not have food taxes.
• Retirement income would be taxed at 4.82 percent. The state would receive 3.07 percent of the tax, and local school districts would receive 1.85 percent. Social Security benefits would not be taxed.
Appearing on PCN’s Call-In Program, Ryan, a CPA by profession, said his bill would ease property tax burdens from seniors who fear losing their homes because they can’t pay their taxes and help the commonwealth with any future financial crisis due to a deficit in the state’s retirement and pension plan. The deficit is in the billions, according to a recent report from economic think tank Truth In Accounting.
“If we have a massive recession, it could have a massive impact on the pensions,” Ryan said.
The state’s “unbelievably complex” financial situation could also lead to possible bankruptcy in 12 years, Ryan said.
Callers questioned Ryan’s proposal, citing a 2004 promise from lawmakers that legalizing gambling would reduce a portion of their property taxes. Casinos did not have a significant impact on taxes, one caller said.
Ryan admitted that there is a trust issue among voters, and they should remember what happened then.
“We have to start building that trust,” he said, noting his plan does not recommend a reduction in the school taxes but would eliminate school property taxes completely.
The bill may also lead some of the commonwealth’s 500 school districts to consolidate. State lawmakers have discussed the consolidation issue separately but, “There is almost as much resistance to that as there is to getting rid of property tax in its entirety,” Ryan said.
While some questioned whether the reforms would hurt the middle class, which received a federal tax deduction for property taxes, Ryan maintained that the bill could save families who are just one paycheck away from losing their homes. He has said previously that the bill would remove 75 percent of school property taxes from seniors.
Ryan has not formally introduced House Bill 13 in the House of Representatives. He said he is gathering information and comments from voters before he officially files the bill.