Expanded Homestead Exemptions?

Expanded Homestead Exemptions?

Almost twenty years after voters approved of a ballot question authorizing homestead exemptions in Pennsylvania there will be a question next month about expanding the exemption threshold, possibly for complete elimination.  The 1997 question passed with close to 60% of the vote.

Currently the Pennsylvania Constitution (Article VIII, Section 2(b)(vi) permits “…local taxing authorities to exclude from taxation an amount based on the assessed value of homestead property”.  This applies to counties, municipalities, and school districts for homesteads, which, by Act 50 of 1998 (the statute that carried out the language of the ballot question) is defined as “The dwelling is primarily used as the domicile of an owner who is a natural person”.

The limit for a homestead exemption is one-half of the median assessed value of the homestead properties in a taxing jurisdiction.  It is a flat dollar amount; for example, Allegheny County offers a homestead exemption of $18,000 for County tax purposes.  This lowers the assessed value of the property, whether assessed at $100,000 or $500,000, by $18,000 and the County’s millage of 4.69 is then applied to the assessed value less the exemption.  That does not apply to municipal or school taxes. School districts currently offer homestead exemptions via legalized slot machine gaming.

The proposed ballot question would ask “Shall the Pennsylvania Constitution be amended to permit the General Assembly to enact legislation authorizing local taxing authorities to exclude from taxation up to 100 percent of the assessed value of each homestead property within a local taxing jurisdiction, rather than limit the exclusion to one-half of the median assessed value of all homestead property, which is the existing law?”

Approval of the question would allow the General Assembly to pass legislation similar to Act 50 and then would permit local taxing entities to offer greater homestead exemptions, but would not be a tax shift proposal (it does not specifically authorize a source/sources of taxation to pay for the homestead exemptions) and would not eliminate property taxes for other classes of property (commercial, industrial etc.) which is the case currently with the Act 50 exemption.  If a taxing body so wished it could provide for an exemption that is greater than is available currently but not a complete elimination.