As our fellow Pitt students once again embark on the often overwhelming journey that is apartment hunting for next year, the voters of Pennsylvania may be inadvertently raising our rental costs.
At the polls earlier this month, 54 percent of Pennsylvanians voted for a constitutional amendment allowing a change in how towns, counties and school districts statewide can collect property taxes. Where previously local authorities could exempt up to half a house’s value from taxes, local governments can now vote to exempt as much as 100 percent of a home’s median assessed value, essentially eliminating it.
If Pittsburgh opts for this route, don’t get too excited — it’s not free money. To make up for lost revenue, the City would likely have to increase taxes elsewhere. And it’s more than likely that students and other residents who don’t own homes will end up paying for the break given to homeowners — harming those who are least able to afford a rent hike.
The measure, called the Homestead Exclusion Amendment, doesn’t do anything itself to eliminate the property tax. It allows the legislature to write a law letting local governments get rid of their own property taxes if they so choose — something it previously couldn’t do. With a state government that’s posting a $2 billion deficit annually, it’s obvious something needs to change.
One of the amendment’s most important distinctions is that it only applies to primary residences. If Pittsburgh were to pass a reduction or even a wholesale repeal, City residents could possibly see an increase in the property tax on rental units to make up the difference. Landlords would pass this expense along to their tenants through higher rents. The City could also raise local income and sales taxes or add taxes to items that aren’t currently taxed.
Students and other low-income earners, who don’t have much extra spending money laying around, would feel the added taxes most acutely. According to Matthew Gardner, executive director of the Institute on Taxation and Economic Policy, added sales taxes wouldn’t only be unfair to low-income earners — they would be bad for everyone.
“You simply aren’t going to be able to raise revenue from folks who have the least income,” Gardner told City Lab in January 2015. “That’s a recipe for fiscal disaster.”
In many ways, Pennsylvania’s state government is already a fiscal disaster. While both state legislators and Gov. Tom Wolf have acknowledged the need to reform property taxes, their proceeds still finance some of the most important public services in the state.
More than 50 percent of the funding for education comes from locally collected property taxes, while only 36 percent of the funds come from the state. This low level of direct state support for public education places Pennsylvania among the stingiest in the nation, ahead of only Nebraska.
The state has several bills related to property taxes working their way through the legislature at the moment. None of them would solve the problem of how to fund public schools. One of these bills would add taxation of commercial, industrial and agricultural property as a source of educational funding. Another adds taxation of something as basic as food as a potential fix for the funding gap. None of them makes an attempt to redistribute revenue to help underfunded districts.
The state legislature is in no position to deal with funding gaps that could be caused by local governments losing funding gained from property taxes. Pennsylvania faces a $2 billion budget deficit and legislators have already spent more than four months attempting to patch the gap. Even if Harrisburg miraculously sorts out its budgetary problems and passes legislation allowing municipalities to eliminate the property tax, it’s still each municipality’s choice to participate or not. That choice will only add to the inequality of the possible property tax cut by exacerbating the disparity in school funding.
Pittsburgh’s government has yet to say whether or not it will take advantage of the amendment and cut its property taxes on primary residences, so Pitt students living off campus in the City don’t have to panic just yet. However, there’s still a possibility that the City might decide to cut taxes for property owners in the future, passing the costs along to renters.
A tax cut always sounds like a good idea to members of the tax base. However, giving local governments the option to eliminate the property tax altogether will do nothing to ease the tax burden for those who need it most — students and other low-income renters — and would leave a gap in funding for public services that would be difficult to fill.
Students already have it hard enough dealing with landlords and figuring out how to cook and clean for ourselves. Why raise our rents any further?
Maggie primarily writes about social issues and economics for The Pitt News. Write to Maggie at [email protected].