Inside 208

For several months, House Republican have been talking about introducing property tax reform legislation. Last Thursday, a nine-bill package was introduced along with a proposed constitutional amendment. Eight of those bills and the proposed amendment to the Constitution received a hearing in House Government Operations committee yesterday.

Collectively, the bills would eliminate the uncapping (pop-up tax) for all property upon sale, the elimination of the State Education Tax, the elimination of the state real estate transfer tax, the elimination of all personal property taxes, and a reduction in residential utility rates.

Additionally, the constitutional amendment would eliminate the uncapping (pop-up tax) for all property upon sale.

The final piece of the package would create a new sales tax on services. This bill was not on the agenda but would act as the revenue replacement mechanism for schools and local government due to the loss of property tax revenue. It proposes to hold schools harmless first, then provide revenue to local units of government. If there is not enough revenue to hold local governments harmless, they would get a prorated amount based on the funds available.

Below is a list of the bills with links and short descriptions.

• HB 5872 (Bollin) Elimination of the uncapping (pop-up tax) upon sale of a property.
• HB 5873 (Frisbie) Elimination of the State Education Tax
• HB 5874 (Linting) Repeal of the state real estate transfer tax.
• HB 5875 (Bohnak) Implementation legislation to repeal the state real estate transfer tax.
• HB 5876 (Kuhn) Implementation legislation to repeal the state real estate transfer tax.
• HB 5877 (Robinson) Implementation legislation to repeal the state real estate transfer tax.
• HB 5878 (Schriver) Elimination of all Personal Property Tax.
• HB 5879 (Thompson) Utility rate rollback.
• HB 5880 (Meerman) Sales tax on services.
• HJR T (Bollin) Constitutional Amendment to eliminate the uncapping (pop-up tax) of property upon sale

This is an extremely complex issue that has many moving parts. It is also an issue that the League has talked about for years. We were among the first to say that the system was broken and have always welcomed a conversation on how to fix it. We absolutely want to be a part of any negotiations moving forward, but the approach within these bills fails to take a holistic look at reforms and attempts to only deal with a portion of the problem.

On top of that, with property taxes being a key source of revenue that allows us to provide vital public services, the potential and high likelihood that we would not be held harmless under this proposal is deeply concerning.

Rough estimates indicate that the reduction in total property tax revenue is around $4.9 billion. The discussed amount of revenue generated by a new sales tax on services is $4.7 billion but that is still not determined. Under this proposal, that would result in $200 million less for local units of government. Couple this with the elimination of revenue generated by the pop-up and the effects could have an immense impact on services.

While we have long said we need to reform our property tax system to better align local resources with economic conditions and diversify our revenue streams, as written, this bill package does not currently meet that objective. Serious negotiations with the Senate and the Governor have yet to begin and there is no guarantee agreement will be reached. That doesn’t mean an agreement is out of reach though. This discussion is likely to have an impact on budget negotiations and must be taken seriously.

We need a solution that ensures a stable source of revenue for local governments that support quality public services and oppose these bills as written.

John LaMacchia is the League’s director of state & federal affairs. He can be reached at [email protected] or 517-908-0303.