Being a political town, Harrisburg, at any one time, has large numbers of groups clamoring to make their views known to our commonwealth leaders. From marches and rallies on the Capitol steps to a single person holding a handmade sign, there is no shortage of ways individuals and groups can promote their political message.
Typically, I admit, I pay little attention to these efforts, ubiquitous as they may be, since they are most often targeted at niche issues that directly impact small groups of people instead of the general public. Their campaigns and complaints are mostly received as noise in a Capitol filled with even more constant and loud political chatter.
One recent and ongoing campaign, however, has the potential to break through the clutter, at least in its possible impact on nearly every citizen. On giant billboards around the region, “Eliminate School Property Tax Now” signs have appeared next to major highways. The print below the sign refers to a website, www.ptcc.us, which appears to be financed by tea party and other politically conservative groups that have the support of various Republicans in the House and Senate.
Not to be outdone, Gov. Tom Wolf and a few Senate Democrats have recently proposed separate plans that would rebate or reduce school property taxes. The proposal from the governor would significantly reduce or eliminate most school taxes for homeowners in cities like Harrisburg through an expansion of the Homestead Program, but, so far, it has failed to achieve much traction in the legislature, even in his own party.
Details aside, it is noteworthy that leaders in both parties see the need to reduce or eliminate school property taxes. Nearly two-thirds of Pennsylvanians own their own home and would directly benefit from such a proposal. Renters would receive similar indirect benefit from the increased availability and affordability of quality rental apartments and homes.
As an advocate for urban economic development, I find it hard to imagine a more far-reaching and beneficial change to tax structure in our commonwealth than eliminating property taxes altogether and shifting to income and sales taxes to fund our schools, as many others states across the country have done.
There are two main reasons for urban advocates to support elimination of the school property tax: economic growth and social fairness. (There are several other derivative and ancillary reasons ranging from better economic stewardship and farmland preservation to overall increased opportunity and competitiveness for disadvantaged groups that may appeal to urban advocates on the left. For arguments from a conservative perspective, see the website referenced above.)
Economic Development. The current system of local school property taxes wildly distorts investment away from our cities and urban areas via high millage rates, with disastrous consequences. As I have discussed previously in this column, a city like Harrisburg, where the tax rate is 28 mills (just for schools) and 45 mills overall, is at a serious disadvantage in attracting new investment and residents with respect to its suburban neighbors who have tax rates at half or even one-quarter of these rates.
It is no surprise that, over the past half century, the population of Harrisburg has declined by nearly half, while the surrounding region has more than doubled in size and prosperity. This circumstance has been repeated in towns and cities across Pennsylvania as people have fled high-tax urban areas to lower-tax suburban ones. Once the trend began, it became self-reinforcing, as urban school boards had no choice but to raise rates even higher on the folks who remained, causing additional outflow. It is no wonder that dozens of urban areas have been declared distressed under Act 47.
In contrast, demand for urban living throughout the country is strong and rising due to both millennials and empty-nesters seeking walkability and convenience. However, the issue across Pennsylvania’s cities is the lack of quality supply to meet that demand, as the tax burden on real estate generally prohibits new construction or rehabilitation of deteriorated buildings without some type of tax abatement or government subsidy to make it economically feasible. This would all change if developers and homebuyers faced equal property tax rates regardless of which school district they choose to live in. Simply put, if school property taxes are eliminated, there is ample evidence that developers would build in and more people will choose to live in urban areas, helping them to grow and flourish.
Fairness. According to numerous studies and financial advisors, the single most important store of wealth for most Americans is their home. In suburban areas across Pennsylvania, this holds true for most homeowners who generally see the equity in their homes increase as they pay down their mortgage over time. Urban areas, on the other hand, have seen values stagnate or decline and equity fall as their property taxes have risen. As urban areas contain disproportionately more poor and minority residents, the disparate impact of high property taxes on poor and minority communities is easy to see.
Combine that reality with the fact of failing city schools, and poor and minority communities face the double unfairness of paying relatively more and getting relatively less for their money. Harrisburg schools, for example, have some of the highest per-pupil expenditures in the state (top 10 percent), yet produce some of the worst results (currently ranked 491 out of 496 school districts in performance). Without economic development to change this dynamic, the current system forms an invisible, yet all too real, iron gate on these communities, making them nearly impenetrable to long-term change of any type. In the context of the ongoing national debate surrounding fairness and unequal distribution of wealth, there would seem to be no more direct and efficient manner to address this issue in Pennsylvania than eliminating this fundamental unfairness for urban communities.
Teachers’ unions and their supporters (and I am one on many issues) often put forth counter-arguments about “stable funding streams” and the like, but they need to face the reality that our current system of school funding has failed many of the children that it was designed to help the most. At a minimum, the burden shifts to these guardians of the status quo to explain why they continue to favor a system that hurts our most vulnerable members of society and ensures they have little ability to change their circumstances through the kind of economic and social mobility that is afforded by community prosperity and quality education.
No doubt much work needs to be done to ensure that a replacement system of income and sales taxes is fair and equitable and ensures an overall funding level that is, at minimum, equal to our current school funding levels. However, those discussions and challenges can be worked out and are no excuse for preserving a funding system that is so clearly in need of radical change.
It is indeed interesting that this issue has arisen from both the left and the right in our current political culture that is today characterized more by gridlock and delay than compromise and results. It may well represent an opportunity for both sides to effectuate a substantial change to our overall economy and reposition Pennsylvania as a state poised for progress and competitive advantage while addressing a fundamental unfairness in our society.
I am hopeful that a moment of change is upon us.
J. Alex Hartzler is publisher of TheBurg.