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| - For those who would reform Pennsylvania’s system of taxation, history holds many valuable lessons. Consider this scene being carried out almost exactly 800 years ago. King John needed money for his army since losses in war greatly reduced the wealth of the kingdom, and a huge tax would have to be raised in order to rebuild his army. King John raised much of this treasure by increasing land taxes on Barons, and scutage (feudal payment to an overlord replacing direct military service) eleven times in his seventeen years as king, as compared to eleven times by the previous three monarchs over a four decade period. The last two of his increases doubled prior tax levels. (He also imposed the first income tax in English history, but it didn’t last) By 1215, most of the important barons in England had had enough, and they entered London with their troops June 10, 1215. The citizens of the city apparently felt the same way about the issue, because they willingly opened the gates. The Barons forced King John to agree to the "Articles of the Barons", in the meadow at Runnymede five days later, and a month later the royal attorneys created a formal document to record the agreement, the original Magna Carta. Not only did the “Great Charter” create the ground breaking precedent of Sovereign prerogative being limited by constitutional machinery, but it explicitly established two principles central to the topic at hand. First that the King had no authority to take property except “by the due process of law” and “taxation without representation” was forbidden. For 800 years, property owners have despised the property tax, and no matter the nature of the government levying it, or its specific form, property tax has always been the least liked of all taxes. And while taxes, in all the known forms, are generally loathed as an assault on our liberty, we still begrudgingly recognize that they are necessary if we are to live in an ordered and secure society. And in the final analysis, all we are looking for is fairness. Fairness in taxation requires that the tax be fair in three different respects. First, the system must be fair to government itself by allowing it to efficiently raise, necessary funds. Second, the system must be “fair” taxpayer to taxpayer, by treating all with some degree of uniformity, while acknowledging that differing circumstances influence each individual’s ability, and obligation to pay. And finally, the system must treat the individual taxpayer fairly with respect to the government. The first of these tests merely means that no taxpayer, or group of taxpayers, should be obliged to fund an extravagant government. One which spends with such reckless abandon or one so careless in its tax methods, that it is forced to raise one cent more than is required to meet legitimate government needs. Therefore, it is important that any proposed tax reform thoroughly examine the question, “Are the funds being raised absolutely necessary?” And before extensive changes are made to how revenue is raised, government should always ensure that they have cut the fat first. And none of the proposals that have been circulated around Harrisburg in decades have made even the slightest effort to make a no-frills budget, the basis for tax reform. Moreover, as the most extravagant state government in America, Pennsylvania’s legislature has absolutely no credibility on this point. In fact, most of us would not trust our 253 General Assemblymen to run a bake sale, since they lack any semblance of financial discipline, or scruples. The title of the Editorial appearing in the July 13, 2006 Pittsburgh Tribune-Review, said it all “The legislators’ perks, postage, pensions, pay raises and perpetual cost-of-living increases mock the law they solemnly swore to obey and defend.” Trust isn’t the only issue. Present government, at all levels, is bloated. For example, since the U.S. Supreme Court established the one man one vote doctrine, we have had two chambers in our general assembly, both apportioned by population. Since then, the Senate has served no legitimate purpose, and should be eliminated. Similarly, half of the House membership could also be eliminated and no one would ever notice. In other words, our General Assembly is an unnecessary and redundant expense to the tune of $100,000,000. The original Pennsylvania assembly was a single house of ninety members, and while our population and the sophistication of our culture and its attendant problems have changed, so have the tools to deal with them. Ironically, we doubled the size of the state House of Representatives in the mid-1800’s, for no other reason than the public felt that they were all crooks and doubling their number would put into play too many people to corrupt. Clearly, judging from recent events, they were wrong. Another poorly thought out change in government created the anachronistic county “row offices”. Originally the governor appointed the individuals who filled these positions, and to curb the political clout the governor gained through patronage, they were made elective positions in 1838. Although civil service effectively banished patronage a long time ago, Pennsylvania never reexamined the underlying reason that these essentially clerical positions, which have become the breeding ground for their own form of patronage, are elective. Clearly without great difficulty, one can go on and on, citing the staggering inefficiencies of our present state government. To meet the first objective of tax fairness, streamlining Pennsylvania’s government must be priority one, but so far, it hasn’t even been mentioned. The second criteria of a fair tax system, namely equitable treatment between one taxpayer and the others is usually forgotten in favor of targeted tax breaks for special interests. Equity among taxpayers approaches its ideal, when the burdens of government are shouldered most closely by those receiving the benefits. For example, the gas tax treats the tax paying population reasonably fairly, among one another, because one pays in very close proportion to actual roadway use. Obviously with some burdens of government a direct relationship of burden to benefit is not possible. Education is a good example. It stands without question that we all benefit from a sound system of public education. Not only does the student and their family directly benefit, but everyone does indirectly through the economy, which relies heavily on a well educated citizenry. So who should pay? In addition to the individual citizen, shouldn’t business shoulder a significant portion of the burden? But in Pennsylvania, we offer some of the most lavish tax incentive packages in the nation, and then turn around and short change public education to pay for the wasteful practice. Corporate welfare is wrong, period. When the school jointure system was started in the 1960’s the state’s share of overall school budgets was over 50%, now it is slightly over 30 %, so it is not surprising that property taxes have gone up. And since the legislature is not accountable for a fixed part of a school’s budget, it is all too easy to pass along unfunded mandates. In fact, right at this moment, our legislature is considering an increase to the state pension plan that will cost $10 billion over the next 20 years. Of the $520 million per year, it is estimated that $174 million will have to be raised by local school taxes. Finally, a system of taxation must create fairness between the individual and the government. Who should be better off? You or the State? If you think there are too few state buildings or employees, wait till PennDot screws up your driver’s license, or you otherwise get sucked into the maelstrom along the Susquehanna. For over 800 years people have successfully resisted the stamp tax, the tea tax, and the federal carriage tax, etc., etc. But by the many names that taxes are known, there really aren’t that many things to tax. First, money only does three things; namely, it comes in (income), it goes out (consumption) and it stands still (wealth or property), so taxation can only take a limited number of forms. If you think of the overall economy like a three-legged stool, it is not only important that some balance exist among the three foregoing elements to keep the economy functioning smoothly, but governments at different levels can only collect certain forms of taxes effectively, and must avoid competing with other levels of government in the same mode of taxation. For example, taxing authorities at the lower echelons of government can be fairly secure in the notion that neither the Federal, nor the State government will directly enter the field of property taxation because of how administratively intensive the tax is to collect. By contrast income and consumption taxes readily lend themselves to collection on a broad basis, and both can be nationalized. By the same token, a consumption tax like the gas tax is well beyond the realm of a borough, or city, particularly if all the gas stations decide to move out of town. Or if different tax rates exist for neighboring communities, someone is sure to suffer. Despite the huge overhead of property taxes, their principle advantage to local taxing authorities, (and to taxpayers, believe it or not) is that property taxes are inelastic. Which means that no matter how the overall economy is doing they can be predetermined with great exactitude, which in turn means that governmental units that are denied deficit spending, can manage their budgets without creating contingency funds. Contingency funds invariably lead to budget inflation, since a “spend it or lose it” mentality is pervasive among people who work with budgets. The big advantage for the taxpayer to the property tax is that it is a one- time bill that tends to make government more accountable. Compare the idea of paying a nickel every time you open your wallet with the idea of getting a letter one day of the year telling you to pay some division of government $2000. Both ways you could be paying $2000, but which way do you think makes people ask government where the $2000 went? The other aspect of paying a tax once a year to a government entity that can’t deficit spend, is that it makes possible a tax strike. With the federal income tax it is a crime in and of itself to seek an injunction to prevent payment of the tax. But locally, you could bring government to a halt if you had less than a majority of people willing to default on their tax payments for 1 year. Easier than the ‘Boston Tea Party’, it would cost all the activists 10% of their original bill, but you can bet there would be property tax changes if you want to call them reforms. But a modern and carefully thought out property tax system would avoid that possibility and other costs. Consider farm land preservation. Pennsylvania pays millions of dollars every year to preserve farmland that our antiquated property tax system has put at risk. Farmland preservation isn’t the only band aid our tax system has applied in recent years. Property tax rebates for seniors are more like a tourniquet than a band aid, though. There’s no more wasteful thing to do than to send your money to Harrisburg and then try to get them to give it back to you. The paperwork for anyone who’s ever applied for the rebate is daunting. It makes Aunt Edna’s financial matters as complicated as General Motors. And all over a couple of bucks. If we were to take the money represented by just those two funds and directly apply it to reducing Aunt Edna’s taxes without her having to fill out any forms and having a bureaucracy in place to scrutinize them, we’d all be better off. No system of taxation is any fairer than how it is administered. That is the sole problem with property taxation in Pennsylvania today. People who have been in their homes for a long time are being asked to pay taxes based on a speculative value of their home - for sums of money they’ve never seen in their entire lives. The elderly who have been in their homes for half a century or more, and who have paid bond issue upon bond issue for the local school or town are being asked to pay like they are strangers, based on a market driven by land speculators. The property tax system in Pennsylvania can be straightened out, made fair, protect seniors and reduce the taxes we all pay, if the following comprehensive plan is put into place: -Our Constitution should be amended to establish equal funding for all schools and students in the Commonwealth. -Our Constitution should be amended to require the legislature to fund a fixed portion of every school district’s budget in the state, 50% would be a reasonable starting point. -Taxes should be based on what was paid for property (Actual cash value, as opposed to ad valoreum). Since the tax system would no longer be based on assessments, every county’s property assessment office and Board of Appeals would be unnecessary, and the funds generated by doing away with them could be applied to property tax relief. -Eliminate the farm-land preservation trust fund and the senior citizen property tax rebate fund and apply all generated funds to general property tax relief. -Create a fund from new gaming revenues to reimburse new property, (those having purchased their properties within the last 10 years) for the new form of assessment on their properties. -Reduce the size of the Legislature, by eliminating the Senate and cutting the size of the House by ½. -Require the Legislature to return their $240 million dollar slush-fund to the General Budget. -Ban WAM’s (Walking Around Money), those funds Legislators dole out in the form of those ridiculous, oversized cardboard checks. This year’s cost is about $360 million. In the final analysis, we will still have to pay taxes. For those who have been in their homes for decades, my plan would slash their property taxes in all forms. Not just school taxes, but county and local taxes, as well. Much of the burden taken from the shoulders of the elderly, would shift to the developers and land-speculators which have gobbled up Pennsylvania’s valuable farmland, to produce urban sprawl.
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