Pennsylvania’s gubernatorial candidates have created a good deal of hoopla over the issue of property taxes, but experts say that has distracted voters from more pressing tax issues currently confronting the state.
Experts agree that the Commuter Tax and Real Estate Assessments have not been addressed by the candidates, despite the major role the assessments play in the lives of voters.
According to Finance and Economics Professor Robert Inman, “The property tax is not a terrible tax, as long as it’s allocated toward public services.”
At the same time, “People want them eliminated, but where will the money come from?,” asked Robert Strauss, professor of Economics and Public Policy at Carnegie Mellon University. “People don’t want to raise taxes, so there’s a standstill.”
Forms of alternate funding through local or state income tax have been proposed, Inman said, but “either way, you are still paying.”
“You are substituting a property for an income tax,” Inman said. “It’s not going to matter whether it’s part of an income or house for the majority of families in the state.”
The issue of reforming property taxes is closely intertwined with Real Estate Assessment.
According to Strauss, gubernatorial candidates are focused on cutting real estate taxes — namely the property tax — but have neglected to address the issue of fair assessments.
Real Estate Assessment is an “issue of fairness,” Inman said, adding that conducting fair assessments would ensure equity in property taxes.
“Lower valued property — that is, property owned by poor families — is assessed at a higher rate,” he said. “So they pay higher taxes.”
According to campaign managers, Democrat Ed Rendell believes that by first reforming the property tax everything else will fall into place, while Republican Mike Fisher is calling for more assessments to shift the emphasis away from the property tax.
While property taxes have been at the forefront, perhaps the most contentious and complicated issue is the commuter tax, according to both Strauss and Inman.
“It’s a political hot potato,” Inman said.
The commuter tax is a 3.99 percent tax on the income of workers who commute from the suburbs into the city. Overall, the tax generates about $30 million a year in revenue which goes towards services, like improving roads, that benefit both the city and commuters.
According to Strauss, there is a bill currently at a standstill on the floor of the Pennsylvania House of Representatives that would reduce the commuter tax by 25 percent.
Suburbanites are against the tax, claiming it’s a kind of “taxation without representation,” Inman said, while city dwellers hold that diminishing the tax would be a major financial blow to the city.
“It’s easy to see why a politician wouldn’t want to take on an issue that will antagonize one of the groups,” Inman said.
The tax affects two major cities in the state: Philadelphia and Pittsburgh. Pittsburgh, which according to Strauss is on the brink of bankruptcy, could greatly benefit from the commuter tax.
Inman’s research in Philadelphia, however, has shown that traditionally the tax has produced negative effects. He cites an increase in labor costs which encourages businesses to leave the city and results in the loss of 30 to 50 percent of urban jobs.
The candidates appear to be decidedly divided on the question of whether they would support the current legislation.
“Fisher supports a 23-percent reduction of the commuter tax,” Fisher spokesman Kent Gates said. “It hinders growth.”
According to Gates, Fisher feels that “wage taxes are a major disincentive for job performance,” and he would hope to generate revenue by other means, namely restructuring expenditures.
Rendell, by contrast, would not support the legislation to reduce the commuter tax
“in its current form,” Rendell Spokesman Dan Fee said. “This is because they haven’t specified a replacement revenue.”
Rendell “supports decreasing wage taxes,” Fee added. “He decreased wage taxes as Mayor [of Philadelphia from 1991 to 1999], and has an overall record of cutting taxes.”
According to Strauss, while all of these issues are important, the distressing truth is that “there is not enough political will to do much.”
“In even numbered years candidates want to be loved,” he said, so they promise to cut taxes. “In odd numbered years, however, they discover that they can’t afford it.”
About the Series
Every Friday until the gubernatorial elections in November, The Daily Pennsylvanian will run an article analyzing the major issues on the minds of Pennsylvania voters and how the major candidates are addressing them.
As polls change, as the advertisements start to heat up, the DP will focus on the angle coming from each candidate’s campaign and the perspective provided by political experts and non-partisan analysts, as well as how ordinary Pennsylvanians react to the messages of Ed Rendell and Mike Fisher.
And as the campaigns progress and Nov. 5 approaches, share your thoughts at the dailypennsylvanian.com gubernatorial race forum.
