County Exec, State Senator and City Councilman Oppose “Unfair” Assessments

In a tour de force of irony, County Exec Fitzgerald, Councilman Peduto and Senator Fontana will take a stand against court ordered reassessments on the grounds they are unfair. Presumably, they are perfectly willing to continue the unfairness of allowing owners with egregious undervalued assessments to pay far below their fair share of property taxes while at the same time forcing those with correct or too high assessments to pay far more than their fair share of taxes. How interesting it is what some call unfair.

The gentlemen will be supporting Senator Fontana’s bill that would give Allegheny County the opportunity to do away with property taxes and replace school, municipal and county taxes with other taxes. Great idea except for two things. The level of sales taxes (almost double its current level) required to replace all property taxes including schools would drive retail out of the County as non-residents stop coming into the County to shop and residents go to other counties to purchase non-essentials and avoid sales taxes. Higher income taxes? Could non-residents be required to pay? If so, jobs would begin leaving the county. Why would residents of Butler County pay taxes to their schools, county, and municipality and then be saddled with a big tax bill from Allegheny County to pay for schools and municipal services in Allegheny County? Likewise, Allegheny residents who work in a neighboring county would have a big incentive to move to that county.

Non-residents who own real estate but do not shop or work in the County would benefit enormously from not having to pay property taxes to the county, schools or municipalities. Think of out-of-state pension funds for example that own office buildings. That revenue has to be made up somehow. Is that fair to residents? It appears the Senator has not thought through his plan very carefully if he is truly interested in fairness.

Finally, how would countywide sales tax revenue be allocated to schools and municipalities? There would be no way to assign the money by point of collection. Some areas have very little retail sales activity while others are chock full of malls and retailing.

In short, such a dramatic tax shifting cannot be done at just the county level. Pennsylvania school districts have held referenda to shift property taxes to income taxes under Act1. Not one vote has come close to approving such a shift. Property taxes are unpopular but so are high local income taxes. A major shift in tax structure will have to be done statewide if at all.

The aforementioned gentlemen could spend their time in Harrisburg urging the Legislature to rewrite Pennsylvania’s preposterously out-of-date and inadequate assessment laws to require periodic updating of assessments. Or they could urge the amending of the Constitution to eliminate the "uniformity clause" that is the source of all their angst. Or they could join others who want to restructure taxes at the state level to reduce the burden of property taxes.

Sadly, they would rather attempt to make political points than to work for changes that would actually address the sources of inequity explicitly not permissible under the constitution. Posturing while elected–a terrible, perhaps fatal disease in a self-governing polity.

More on State Tax Collections

A previous blog dealt with the data on 2011 tax collections of the 50 states available from the Census and sales taxes. When it comes to income taxes, last year close to $300 billion was collected in combined individual and corporate net income taxes. Seven states do not tax individual income; two tax only interest and dividends. Three of those states-Nevada, Texas, and Washington-tax neither individual nor corporate net income tax.

Pennsylvania runs close to the national average on the share attributed to individual and corporate net income taxes. Nationally, $259 billion (86%) came from individuals and $40 billion (14%) came from corporate net income. Pennsylvania collected $11.8 billion with $9.8 billion from individuals and $2 billion from corporate net income, an 83-17 split.

In 2011, Pennsylvania was classified with 14 other states as having no severance tax. Since Act 13 created an unconventional gas drilling fee that will be levied on Marcellus Shale wells, the state will likely be categorized by the Census as still not having a severance tax proper.

Last year $14.6 billion was collected in severance taxes. Close to $10 billion-70%–came from four states (Alaska, Texas, North Dakota, and Wyoming).