School Taxes and Seniors

From the Pittsburgh Daily Courier

Taxing situations
By Judy Kroeger, DAILY COURIER Saturday, August 2, 2008

Republican state Rep. John Perzel has introduced legislation to eliminate school property taxes for eligible senior citizens while Democratic Rep. David Levdansky has offered a proposal that would freeze millage rates set by school districts in January 2009 and eliminate them in 2010.

Perzel's legislation, House Bill 1600 and House Bill 1951 would apply slots income to eliminate school property taxes for homeowners 65 and older with annual incomes of $40,000 or less.

As written, Perzel's bill states that qualifying senior citizens would send their school property tax bill to the State Department of Revenue within 45 days of receipt. The revenue department would send a check to the school district for the amount of property tax owed.

Perzel said the legislation would help 600,000 homeowners throughout the state. The program would cost $1 billion of the state's estimated $1.1 billion slots money.

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Currently, all property owners who qualify for homestead or farmstead exclusions divide slots money under Act 1. The money will, for the first time this year, reduce property taxes by amounts varying by district, regardless of the property owners' age. A constitutional amendment would be necessary to take the rebates and apply it only to the elderly.

"When gambling came to Pennsylvania, it was with the promise that the revenue would be used to provide property tax relief," Perzel said. "My bill does exactly that."

The legislation has been voted out of the House Finance Committee, and may come to a full House vote when the body reconvenes after Labor Day.

"This legislation will keep a long-overdue promise to Pennsylvania's seniors," Perzel said. "No senior should ever have to choose between buying food or medicine and paying their property tax bill."

Levandsky's proposal is broader. "My bill provides the ultimate in property tax relief -- it eliminates the tax entirely -- freezing millage rates next year will halt any tax increases before school property taxes would be eliminated in 2010. My legislation gives the General Assembly until 2010 to decide how to provide adequate and stable funding for our public schools that is fair and does not unduly burden senior citizens and working families." The House Finance Committee has approved the amendments.

He said that once rates are frozen, the bill would give lawmakers 15 months to implement a permanent method to eliminate school property taxes. In the meantime, the Legislature would transfer funds from the Budget Stabilization Reserve Fund, also called the Rainy Day Fund, to cover any allowable increases approved by school boards in 2009.

Levdansky also has proposed a constitutional amendment (House Bill 1947) to eliminate school property taxes for homeowners only, which passed the House unanimously last January. The Senate has taken no action.

A constitutional amendment must pass in two successive legislative sessions and receive voter approval. Levdansky said the time lag is why he proposed an amendment to Perzel's House Bill 1600 "to completely eliminate school property taxes in 2010."

Rep. Jess Stairs (R-Fayette/Westmoreland), said his first choice for gambling money "would be to give it to everybody. Not far behind is to give it to seniors."

Stairs has come to that conclusion because Act 1 is "unfortunately, not widely accepted. In poorer districts, it's accepted. If you get a $200 reduction on a $700 tax bill, you might be for that, but if you can only give a little to everybody, give it all to seniors."

Stairs said property tax relief will remain a big issue when lawmakers return after the summer recess. "There was some relief under Act 1 with gaming, but it was minimal."

Rep. Tim Mahoney (D-Fayette) called Perzel's bill "a political statement," but voted for it. "We need to do something." He acknowledged that the bill, allowing senior school property taxes to be eliminated at the expense of younger taxpayers is "against the constitution to let one group get it and not another, but I voted for Perzel's bill. I vote for anything that would benefit seniors. I would vote for a constitutional amendment. We need change. There is no question that we need change or we'll be left behind."

Mahoney said he has seen seniors in homes they cannot afford any longer due to school taxes. He said the first billion of gambling money would provide real relief to senior homeowners and any more "would be divided down to others."

Rep. Deberah Kula (D-Fayette) also voted for Perzel's original bill. "That legislation came through so quickly. How do you ever vote against eliminating property taxes for seniors?"

In the time since the vote, she said she has spoken to seniors who have expressed concern for their children and their grandchildren who also suffer under high school property taxes.

Kula said several options exist for eliminating school property taxes, including a 0.5 percent increase in sales tax for items currently taxed. She does not favor taxing food and medicine. Kula said she would support taxing clothing, which currently is exempt. "I am not in favor of expanding it to everything," she said.

A small increase in the earned income tax would also be needed to eliminate school taxes, but Kula did not specify how much.

She said a combination of slight tax increases combined with gambling revenue would "provide more relief to more people. I lean to that from the feedback I've received. The sales tax, everyone would pay a share based on purchasing habits."