Nov 5, 2017 4 min read

When voters go to the polls in Pennsylvania on Tuesday – and, history suggests, there won’t be many of them – they will be confronted with a referendum question that sounds tempting. Here’s how it reads:

“Shall the Pennsylvania Constitution be amended to permit the General Assembly to enact legislation authorizing local taxing authorities to exclude from taxation up to 100 percent of the assessed value of each homestead property within a local taxing jurisdiction, rather than limit the exclusion to one-half of the median assessed value of all homestead property, which is the existing law?”

English translation: Some homeowners in the commonwealth might, at some point, not have to pay property taxes on their homes. Hooray! Who wouldn’t want that? This should be approved not by a lopsided margin, but by ringing acclimation!

But hold up just a second. Odds are, this referendum will not make your property taxes go away, at least not for quite a while. And if they do, the revenue that is lost from them will not be replaced by some pot of gold at the rainbow’s end. Taxpayers will still be paying to keep the lights burning in public schools and the roads paved and clear of snow, just as they always have. They will just be paying for it in a different way.

Here are the nuts and bolts of the referendum: Right now, a county, municipality or school district can allow up to 50 percent of the median assessed value of homes within their communities to be exempt from taxation. If the referendum is approved, it would allow those taxing authorities to exempt 100 percent of the median assessed value. PennLive explained it this way: “Let’s say the median assessed value of homes in a school district is $100,000 and that district currently excludes 50 percent or $50,000. That means the owner of a home valued at $200,000 currently would pay property taxes on $150,000 of the home’s value, while someone with a home worth $50,000 would not pay any property taxes. If this constitutional amendment were approved and the school district’s homestead exclusion was set at 100 percent of any owner-occupied residential property’s assessed value, no homeowner would pay property taxes.”

But here come the caveats. First, if this referendum is approved, the Legislature would have to fashion a law that would give local taxing authorities the power to eliminate property taxes. If this happens, it would be necessary for new taxes to be put in place, such as income or sales taxes, to replace property taxes. Even if a school district opted out of financing their operations through property taxes, a township, borough, city or county could retain them for their purposes.

Also, even if a school district decided to do away with property taxes, it would have to retain property taxes as long as it is carrying debt that must be repaid.

State Sen. Michele Brooks, a Mercer County Republican, is an opponent of the referendum, and believes the commonwealth’s voters don’t fully understand all of its implications.

“This is a major policy shift,” she told PennLive. “The only piece people are talking about seems to be that it may remove property taxes. But this homestead exemption legislation is the first piece to raising the personal income tax, increasing the sales tax, or taxing things that are not currently taxed. It’s a bit disingenuous to omit that part of the conversation. We need to call it what it is. People are tired of being misled. They need all of the information.”

There’s every likelihood that new taxes to pay for schools or local government would hit the working and middle classes the hardest. Plus, relying heavily on sales taxes would not ensure a reliable stream of revenue for schools or local governments when the economy takes a tumble, as it inevitably does.

It’s a rare point of bipartisan agreement that the property tax system needs to be reformed in Pennsylvania. Coming up with a solution that is both reliable and fair is not easy.

There are a lot of caveats attached to this referendum. And another caveat should probably be added – caveat emptor. It means, “Let the buyer beware.”