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Nazareth, Pa., United States

Monday, September 29, 2014

Tax It Where It Lives, Not Where It Works

For the past several years, a group of mostly conservative thinkers has advocated patriotic-sounding Property Tax Independence Act, In a bid to make themselves sound like the Founding Fathers, they call their bills HB 76 and SB 76. Their logo also is surrounded by 13 stars. I guess that's in honor of the 13 original states or something. Basically, their plan is to phase out property taxes over two years and then play their fifes and drums and recite the Pledge of Allegiance.

In Easton, Democrat Mayor Sal Panto is so terrified of raising property taxes to meet that City's obligations that he instead imposed an unpopular commuter tax.

No question about it, property taxes are unpopular, and are particularly unfair to seniors on fixed incomes.

But according to The Wharton School economist Robert Inman, the property tax is probably the fairest of all the taxes imposed by local government. He was one of the featured speakers at a Lehigh University Symposium on Friday on the crisis in local government finance.

His specific point of reference was the city, where taxes are higher than in the 'burbs, and his basic argument is that all taxes are bad. But as we all know, they are a necessary evil. He explored which taxes do the least harm. Believe it or not, it's the property tax. He did the math and everything.

Property taxes are evil. 

If Philadelphia's tax rate of 2.99% were to increase by just 1% to 3.99%, Inman calculates that average city property values will decline by 20%. "That's a pretty big effect," he notes.

Business taxes are evil. 

This is a tax on business activity, not profit, and can be devastating to a new business. If Philadelphia were to increase its gross receipts tax rate by just 0.10%, the net result would be a 4% decline in the City's business activity.

Wage and Commuter Taxes are evil.

Those taxes cause jobs to leave a City. Philadelphia woke yup to this reality and has begun to reduce its wage and commuter taxes. Reducing the resident rate from 3.93 to 3.76%, and the non-resident rate from 3.50 to 3.35%, is expected to result in an 8,375-job increase by 2018.  

Tax It Where It Lives, Not Where It Works

According to Inman, the fairest way for a City to tax is by moving from a mobile to an immobile tax base. Commuter taxes, wage taxes and gross receipts taxes just drive business and jobs away. Lowering the wage tax will result in more job, more income and encourage people to live where they work by investing in real estate.  he would increase real estate taxes, but homeowners who live in their homes would be afforded a partial exemption.

All of this was in a 2009 Task Force recommendation that was never implemented.

The political winds, however, have been blowing the other way.


Peter J.Cochran said...

Bernie,No one likes to pay the man!However, in Easton ,Pa.,virtually no manufacturing is done,any longer. Service based economies and government entities along with our mostly tax exempt Lafayette College are the base for what rows the boat-- the cash flow.Hell, we have about 1K people in the housing authority buildings that are exempt from reporting their presents here at all. Easton being the county seat gets hammered disproportionately. We are in a genesis here of sorts . When the Wild West Ward, along with non-compliant land lords are controlled ,the quality of normal hard working families will increase here greatly.Real estate needs to of coarse remain stable and not decline. Safe conditions are on the top of the list for self preservation and then other things follow. I bet I can find 3 non-compliant building a day . School taxes are property taxes .ONE MAJOR ISSUE IS -I have reason to believe our school district does NOT document addresses of students checking into the schools and thus a larger percentage then what should be the natural demand for class rooms exist along with utilities,buses, fuel and costs to tax payers,who pay the freight. Retired people are fixed income folks. Good day.

Bernie O'Hare said...

Peter, So you tax what little manufacturing is left and watch them flee> That is what is going on.

Also, I don't know why someone would pretend to be in Easton, but all that means is that another school district in P-burg, S Valley, Bethlehem or Nazareth is getting a break. Presumably, some students who should be in Easton would be giving false addresses there.

Anonymous said...

Until there is a reassessment, I don't think Sal can raise the property taxes in Easton much higher. The max allowed is 25 mills. The issue isn't taxation. It's spending. Specifically pensions and healthcare. As long as the feel good do nothings in Harrisburg like Bob Freeman fail to enact real pension reform, 3rd class cities like Easton are doomed financially.

Anonymous said...

Maybe Sal can get another buck tacked on to those parking meters and raise the cost for putting a car in the parking garage.
He loves his parking income.

Anonymous said...

Easton is a perfect example of a complete inability to control spending. Its millage is maxed or nearly maxed. Its pension problem was temporarily squirmed out of on the backs of county workers and WaWa cashiers. It's militaristic, aggressive parking enforcement is the new sugar daddy. It'll raise almost $1 million this year. The mayor is so drunk on spending and defensive about his pocket picking, he's called tens of thousands of city visitors who run afoul of budget-balancing, parking enforcement storm troopers "law breakers!" You'd think they're the "outsiders" he's always blaming on the city's daily gun violence. That's the degree to which he'll lash out if you question his insatiable appetite for more and more money. He's already shaken residents upside down to empty their pockets. He's done the same to county workers. He's always looking to support his habit.

Bill Coker said...

Between Lafayette College, churches, and County properties being tax free, I believe something like 40-50% of properties are tax free. Also the city has a huge overpaid staff for a town of 20 some thousand people. How many towns of that size has a paid counsel making over $9000 each with full benefits and retirement, too. I believe each department head makes at least $50,000 and there are several positions paying over $90,000.203

Anonymous said...

Do you believe $50,000 is an outrageous sum?

I think it's outrageous if you do.

By the way, to the people complaining about Easton, how many of you actually buy things in Easton businesses? I do and I don't even live in Easton. (I'm usually the only person in the stores when I'm downtown.)

Anonymous said...

I used to shop downtown regularly and liked the way things were improving. The restaurants were/are very cool. Two whopping tickets cured me of Easton. The tickets were absolutely my fault. But each time I was over limit by just minutes. I was having too much fun and lost track of time. The cost was outrageous and can be easily avoided elsewhere. The 'burbs have lots of great independent restaurants with plenty of worry free parking. The owners of Becks just expanded into Bethlehem Township and the place is terrific. There's a fine line between fixing your town and abusing those you attracted. I'm not sure what Easton's finances are like. I know parking enforcement is the reason I'll only go there if I have to. Bethlehem is just as bad, btw. Cars were towed out of Celtic Classic by the dozens on Saturday.

Anonymous said...

Lafayette has a $700 million endowment. At a very modest 5% (smart Lafayette folks can easily double that) income on that endowment, the college makes and $35 million per year before collecting a single tuition payment. Through the miracle of compound interest (as former Treasury Secretary and Lafayette grad, William Simon like to say), the pile gets rapidly larger each year. Those railing against income inequality need look no farther than Lafayette and Lehigh for one of our society's most outrageous examples. Lehigh's nest egg is over $1 billion.

Peter J.Cochran said...

Anon 4;15 You are on point in your issue.Lafayette College is a very wealthy entity.Under the current real estate tax structure all taxpayers of the City of Easton ,Northampton County and the Easton Area School district subsidize its tax exempt real estate and business operations .Why do I a Vietnam veteran and Easton Firefighter living in an entry level College Hill house with a wife and two kids pay Lafayette College's real estate taxes?

Peter J.Cochran said...

Reason ; We don't insist that our politicians have 'testicular endowment'. We have weenies ,that worm around the issues of what is fair. Today I witnessed a student with a PORSCHE suv that had to cost as must as my home . Wow....

Peter J.Cochran said...

Anon 4;06 This probably my fault as I have propagated vehicle enforcement as former Constable here. The intent was to identify' squatters' that fail to pay income taxes to this city along with fugitives from New York and New Jersey. If you contact me and come back for dinner, I will return out of my own pocket your fine costs personally.I want folks like you to return and patronize Easton business.

Anonymous said...

The Commuter tax is rape simply put. Your taxing the wrong people. Workers who live in Palmer, Wilson etc. are trying to make in living in Easton and have a legal address of Easton and yet are taxed for a commuter tax. What a joke ! Call it what it is, a pure rape of people who work in the city and are not from out of State.

The Central Scutinizer said...

4:06 - So what you are saying is that because you have no ability to manage a parking meter - even parking meters controlled by phone-based apps and/or credit cards, you won't go into any city? Enjoy the Olive Garden.

Anonymous said...

Classic BS from a dope who pays no property tax. Section 8 here I come

Peter J.Cochran said...

Commuter Tax 7;52 is NOT Rape.What happens is Easton City Police and Fire for example would be on your problem in moments. I can imagine you don't like paying here with your tax issues. But, your COSTS are not the same after your taxes are done. This City is moving forward . What you thought you would loose in taxes will end up being a small issue after your employer has a strong foothold here in the genesis of Easton ,Pa. and you continue to be employed in a safe environment.

Matt Miles said...

My most sincere hope is that this whole facade of HB 76 just goes away entirely. Northampton County, PA Income and Salaries: income per capita is $29,229, which includes all adults and children. The median household income is $59,551.

That means 50% of residents are within a bellcurve of 25-45k per year. We've already been slapped with a regressive gasoline tax hike, and HB76 wants to raise the sales tax another 1% and expand it to clothing over $50 amongst other things.

Yes, we need to look at reduced spending at some levels, but adding more regressive taxes, especially in places like Philadelphia, you're seeing some of the migration of some of the poorest migrating out of the cities to places like Shenandoah, Mahhanoy City and Lehighton, and bringing those issues with them.

Property taxes are the fairest form of taxation right now, but from what I am seeing, it's by far not the worst thing.