Negotiations Continue on Property Tax Reform
Assistant Director of Government Affairs
Pennsylvania Association of REALTORS®
Prior to the holiday season, the state House of Representatives and Senate each passed separate versions of property tax reform legislation. Several discussions were held in late December between Governor Edward Rendell and House and Senate leadership but yielded no concrete outcome.
The House plan – passed in the form of an amendment to Senate Bill 854 – provides for a base expansion of the sales and use tax, increases the personal income tax to 3.29 percent, increases the Property Tax and Rent Rebate program, and uses gaming revenue to provide for property tax relief.
A hearing on the House plan was held in early January by the Senate Committee on Legislation. Various groups testified on the proposal, with most stating that an expansion of the sales tax would hurt low-income consumers as well as damage local businesses that may have to let some employees go if revenues are impacted by fewer sales.
Secretary of Revenue Greg Fajt testified regarding an analysis of SB 854. The department concluded that the plan would raise $2.1 billion but since it dedicates about $2.5 billion for property tax relief in FY 2006-2007, there would be a shortfall of about $379 million.
The Senate plan - Senate Bill 30 - expands the rent rebate program to increase eligibility requirements to $25,000 from the current $15,000; provides that in the 2006 primary, each school district (with the exception of Philadelphia, Pittsburgh, and Scranton) will propose a referendum question asking voters to authorize an increase in the Earned Income Tax (EIT) to provide property tax reductions; provides that in the 2007 primary, districts (except Philadelphia) may choose to propose a new referendum to either increase the EIT or to convert the EIT to a Personal Income Tax (PIT) to provide additional property tax reductions; all school districts will receive money from gaming revenue.
Neither plan includes an increase in the realty transfer tax or a sales tax on real estate services. REALTORS® sent more than 12,000 letters to House and Senate members on these issues advising of the detrimental effect on the housing industry should those measures be included.
As of this writing, House and Senate leadership were scheduled to meet with the governor again for further deliberations. Weekly updates are posted on PAR’s home page at www.parealtor.org.