America's Property Tax Advisor

Pennsylvania Approves Property
Tax Amendment


Pennsylvania voters approved a constitutional amendment on November 7th that could ultimately lead to property tax reform. However, the vote will not change anything immediately.


Statewide, the ballot question passed by a margin of nearly 140,000 votes. But in Philadelphia and its surrounding counties — Bucks, Chester, Delaware, and Montgomery — voters rejected the measure by a margin of 94,000 votes.


Ballot Language


The ballot question stated: “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% 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.”


It essentially asked residents if they want to give school districts, municipalities, and county governments the authority to totally get rid of property taxation for homeowners.


In 1997, Pennsylvania voted for a “homestead exclusion” amendment that allowed local taxing authorities to exclude up to 50% of the median assessed value of all owner-occupied homes within the taxing district. Relatively few municipalities or school districts took advantage of the change.


Only an Option


There are a couple things to keep in mind when considering the elimination of school property taxes. First, the amendment gives local taxing authorities the “option” of eliminating property taxes; it doesn’t mandate it. State lawmakers must implement legislation to spell out how those options may be applied.


Second, with any substantial change to the property tax, you must make up any of the cuts through other revenue, almost certainly a local earned income tax, since the Legislature is likely not going to levy a natural gas extraction tax. Obviously, an earned income tax would greatly benefit senior citizens whose highest earning years are behind them, but it would put much more of the tax burden on young working families, particularly poor ones.


Confusion over Tax Elimination


The anti-tax group Pennsylvania Liberty Alliance was pushing hard for the adoption of HB76, a proposal that would eliminate school property taxes statewide for both homeowners and businesses. A lot of people confused the two but the proposed amendment and HB76 are separate things. They were not voting on HB76 when they voted on the amendment.


HB76 would be one way to implement the amendment. HB76 would require the state to replace an estimated $14 billion in school property taxes, dollar for dollar, with an increase in the state personal income tax to 4.95 percent and in the state sales tax to 7 percent (adding a lot of currently untaxed items). No other state has done anything like this to our knowledge.