local taxes Archives - Allegheny Institute for Public Policy

Are Higher Property Assessments Coming for Gas Lands?

Posted on August 17, 2011 by Editor

One of the indisputable findings of our work on the impact of Marcellus Shale is that rent and royalty payments are having a significant impact on the incomes in counties where there are substantial wells drilled and operating. And this begs the question: are the property assessors in these counties looking at the effect of rent and royalty payments on the value of land-both the acreage leased to gas drillers and neighboring properties that could suddenly become much more valuable?

A complaint often heard about Marcellus operations is that local governments and communities are being saddled with higher costs stemming from the drilling activity but do not have more revenue because there are no local fees or taxes levied directly on the gas companies. The only revenue source for most local governments is the property tax. Sales taxes go to the state. Income taxes go to the state. Capturing wage taxes on non-residents who come and go is problematic. The longer term tax revenue generator will arise from property values.

Granted, when the gas runs out the value of the land will likely go down, but in the interim will counties with large levels of drilling activity and substantial rent and royalty incomes that will be in place for years at least consider looking at the market value of the rent and royalty producing land?

Ding Dong, the Parking Space Tax is Dead

Posted on June 1, 2010 by Editor

The attempt by Steel Valley School District to create a tax that would apply to free parking spaces serving businesses is over as the school board removed the tax after they heard rumblings that the business community raised the possibility that a lawsuit would soon follow enactment of the tax.

That was the predictable outcome based on the fact that it has yet to be established how a municipality or a school district can levy a tax on parking where there is no money paid for the transaction and how that would differentiate itself from being another tax on real estate. Calling it a "parking privilege tax" does not mean that it is a taxable privilege under Act 511. Much like the City of Pittsburgh’s tuition tax plan this past year, officials try to levy taxes based on the feeling that nothing in the law prevents them from doing so.

If the school board really believed they had this power, then they should have spent the taxpayers’ money to get the backing of the courts. After all, many on the board said they wanted to enact the tax so as to take pressure off of residential property owners, yet they exempted many types of businesses and the first 30 parking spaces from inclusion in the tax base. Instead the board passed a 2.86 real estate mill increase with enough wiggle room for the district to avoid putting the issue before those very same homeowners in an Act 1 referendum.

Thus in the last two years or so both Steel Valley School District and Robinson Township have considered the tax only to back off of it. Interestingly, the municipalities within the district (Homestead, Munhall, and West Homestead) are levying the tax and, for whatever the reason, have not faced a legal challenge.

As we have suggested previously, it would be beneficial for the General Assembly to revisit and clarify Act 511 and make it clear as to what type of taxes local governments are permitted to levy, the rates, and possibly a cap on how many tax sources they can draw upon.

Schools to Take Parking Tax for a Test Drive

Posted on April 27, 2010 by Editor

We’ve written in previous Briefs and blog entries about the efforts of several municipalities in Allegheny County to levy a tax on supposedly free parking spaces where no transaction is carried out. Unlike the parking tax in Pittsburgh and other municipalities around the state where patrons pay for an on-street or garage space and the payment is subject to a tax, this new levy would place a flat fee on a business based on the number of spots they have.

Municipalities have taken this course of action under the presumption that parking is a taxable privilege under Act 511 and, since the Act does not prohibit taxing such a privilege (recall the same argument was made for the tuition tax) then they are free to do so. Someone wronged by the tax would have to bring a lawsuit to determine if the privilege is indeed taxable.

Well the stakes have been raised in the Mon Valley as the Steel Valley School District is prepared to discuss levying a $30 per space tax in the communities of Munhall, Homestead, and West Homestead-all three communities levy a similar tax-after exempting the first 30 spaces. Clearly, the logic for the District is either (1) since Act 511 applies to school districts as well as municipalities and nothing in the law prevents districts from having such a tax they should do it or (2) if no one has yet challenged whether this tax is permissible why leave money on the table?

Is there a limit to taxable privileges for local governments in PA? This instance might give us an a better answer to that still murky question.

More Choices on the Tax Menu

Posted on March 10, 2010 by Editor

The real estate tax; the wage tax; the Local Services tax; the realty transfer tax; the parking tax; the poured alcohol tax; the gross receipts tax; the parking tax; the mechanical devices tax; the amusement tax…

You get the idea: there is a plethora of tax sources available to local government in Pennsylvania. That’s why it is always surprising to hear calls for even more sources of tax revenue, particularly when there is a call for layering more taxes upon the existing ones instead of phasing them out.

Just last week the PA League of Cities and Municipalities called for counties to get an additional 1 percent on the sales tax (except in Allegheny County and Philadelphia, which already have local add-ons) for "easing school property taxes (remember Act 1?) and helping county government and municipalities pay their expenses".

Or counties could get a poured alcohol tax like Allegheny County has or, failing those options, the state could just hand out revenue to offset the presence of tax-exempt property (which often generates much of the taxable activity that is captured by one of the many taxes listed above.

Maybe a better option-in light of the massive state budget shortfall, the looming problems with the two statewide pension systems, and the impact of legacy costs at the local level-would be to try and control the spending side of the equation with a spending cap that is tied to inflation and/or population, referenda on tax increases and creation of new tax sources, and a movement to a defined contribution system of pensions for new employees. Otherwise there might not be enough room in the local tax code to list all of those tax sources.