An opinion piece today discussed the proposed tax shift to eliminate all property taxes for public school purposes, a proposal that we have written about before (including three years ago in this Brief) and other proposals of school tax relief (these two pieces from 2015) and this one from late last year where in scenario #2 we looked at the complete elimination of school property taxes.
As we noted, a lot of the consternation on the proposal would arise from the dollar for dollar replacement of school property tax money wherein wealthy districts raising a lot locally would get back much more from the state than poorer districts not raising a lot that get more per-pupil from the state now. That was a point not covered in the opinion piece. We mentioned that if the state decided to send back equal per-pupil amounts to districts that it would likely anger high spending districts.
As to whether a taxpayer comes out ahead or behind in a tax shift depends on the value of one’s home, income, and spending subject to taxation. The piece uses Pittsburgh as an example, which has a higher than typical earned income tax for a school district (1.75% vs. .05), a lot of commercial property value ($8.9 billion), gets significant funding from the state (per-pupil amount of $9,782 in 2014-15 vs an average of $5,912 in Allegheny County school districts), and a low millage rate (9.84 mills). In PPS the school tax bill represents 44% of the total tax payment (county, municipal, and school), which is lower than the typical situation in Allegheny County (on average the school tax bill is 66% of the total). Based on the personal income tax hike for a person making $50,000, the tax bill goes up $940 (based on the PIT rate going from 3.07% to 4.95%). Wipe out the school tax bill for the property in Pittsburgh Public Schools and the piece states that if the school property tax was eliminated ($984 on a $100k home prior to any homestead relief) the swap is just about even (not figuring in sales tax change).
Move the $100,000 home to North Hills School District with its current millage of 17.8 and the net property tax/income tax change is now an $840 decrease. Take a person making double the income ($100,000) and have that person living in a $50,000 home in Steel Valley (22.01 mills) and the net effect is a $780 increase. Again, this goes without figuring in the impact of a sales tax hike and broadening of taxable goods and services but the point is the effect of a tax shift is going to vary.
