Lawmaker Unveils Innovative, Controversial Property Tax Reform Plan that Includes Taxing Retirement Income

From PA Chamber of Business & Industry

Rep. Frank Ryan, R-Lebanon, held a news conference two weeks ago where he discussed yet-to-be-introduced legislation (H.B. 13) that calls for the elimination of school property taxes in the Commonwealth with new revenue derived, in part, through a retirement income tax.

Specifically, the proposal intends to generate $15 billion annually in replacement revenue for the state’s school districts through:

• A 4.92 percent retirement income tax, excluding Social Security benefits
• A 1.85 percent local Personal Income Tax (in addition to the state’s 3.07 percent PIT)
• A local Sales and Use Tax of 2 percent on items that are already subject to the state Sales Tax; and
• A local Sales Tax of 2 percent that would be added to most food and clothing, which are currently exempt from the state Sales Tax.

Property tax reform is an ongoing, hot button issue in Pennsylvania, as these tax rates have risen precipitously in certain areas of the state, making it difficult for some homeowners to continue affording their properties.  One of the most debated legislative “fixes” has been a proposal to replace school property taxes with increases to the Sales and Personal Income Taxes, along with the expansion of the Sales Tax base to additional goods and services.  The PA Chamber stands in opposition to this proposal because it would simply “shift” the tax burden from one segment of taxpayers to another and target renters, small businesses and young families; and would rely on volatile taxes that tend to fluctuate more with the economy.  Tax experts and school officials have warned this framework would put school districts and the entire Commonwealth on financially shaky ground.

As noted by PA Chamber Vice President Sam Denisco at a recent property tax-focused public forum, Rep. Ryan’s bill presents an outside-the-box way of approaching the state’s property tax issues and should be discussed by lawmakers.  At his news conference last week, Ryan stressed that his plan is unlikely to pass without the support of Pennsylvania seniors, admitting that “this is not going to be an easy sell.”

Rep. Ryan’s news conference was covered by various media outlets, including Pennlive which noted the PA Chamber’s previous comments about his proposal.