Update 11/6/17 - Additional information provided by Rep. Rosemary Brown:
As we approach Pennsylvania’s Election Day, voters across our Commonwealth will be presented with a very important referendum question. Because this question can be confusing, I am hoping the following information may be helpful to you. This is the question on the ballot:
“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?”
A “yes” vote on this question will not, by itself, bring about the reduction or elimination of property taxes.
The approval of the referendum would allow the Legislature to amend the state’s Constitution, which now requires that all property in Pennsylvania be taxed equally. The approval of this question would give the Legislature the power to allow up to 100 percent of the assessed value of homestead and farmstead (primary residences) to be excluded from property taxes.
How, when, and if that is done at the state or local level is not yet decided. The source of revenue to replace the loss of property taxes from primary residences would also have to be decided by the General Assembly (the state House and Senate) if the amendment is passed.
To exclude all property taxes, the state needs to come up with about $14 billion to provide property tax elimination for commercial and residential properties. By exempting just primary residences (homesteads and farmsteads), the revenue that needs to be generated is almost half, approximately $7 billion, focusing on residences and keeping people in their homes.
A “yes” vote will show Harrisburg that local residents want and need property tax elimination. A “no” vote will offer less legislative options towards residential property tax relief.
Here are some frequently asked questions that I have received about the proposed amendment to the PA Constitution:
1. Has commercial inclusion hurt the efforts of Senate Bill 76 (property tax elimination) with those not wanting to give businesses a tax break?
To some extent, yes, I believe the inclusion of commercial properties in Senate Bill 76 has hurt its chances. The revenue needed to replace both commercial and residential is $14 billion. Residential alone is only $7 billion.
2. How long will elimination take on homesteads if this would pass?
If the referendum is approved by voters, several steps would need to take place prior to anyone being able to see full elimination. It is very difficult to put a time frame on this process. First, the General Assembly would have to pass enabling legislation to implement guidelines and parameters as to how a local taxing jurisdiction could go about eliminating property taxes on homesteads. This would undoubtedly include many ideas which would need to be narrowed down. Second, local taxing jurisdictions – townships, boroughs, counties, school districts – must take steps in accordance with this enabling legislation to effectuate the increased Homestead Exclusion program.
3. Why is the wording on the ballot question the way it is? It seems rather difficult to understand? How was this arrived at?
Under current law, the Secretary of the Commonwealth is responsible for drafting the ballot question and the attorney general’s office prepares the summary.
4. If I own a townhouse and live in one of the units, but rent the other, will I see relief on this entire property, or half of it?
If further legislation is passed, you would need to indicate the percentage of the property which qualifies as a homestead for the exclusion.
5. Will there be any protections for commercial properties against new capital campaigns by school districts?
The language of the Pennsylvania Constitution prohibits a local taxing authority from increasing the millage rate of its tax on real property to pay for the exclusion. That language remains in place.
6. What effects will this have on land if I have enrolled in the Clean and Green Program?
The Farmstead Exclusion and the Clean and Green Program are separate programs. The Clean and Green Program is a land conservation program that lowers the property tax rate for the vast majority of landowners who enroll in the program. The Farmstead Exclusion applies to farms used as the domicile of an owner. Provided the constitutional amendment is successfully passed, property tax relief would only apply to homestead and farmstead participants.
7. Could a severance tax be used for property tax relief?
Yes, any number of taxes could be considered to provide additional property tax relief in future legislative proposals.
8. What other taxes could be raised and/or implemented to replace the property tax on homesteads?
Any number of taxes could be used to provide additional property tax relief, such as sales or income taxes.
9. Could this create a system where property taxes become tiered because the uniformity clause is removed from the tax on homesteads?
It is probably most constructive to look at the current exclusion which is also an exception to the uniformity clause. Our current law requires the percentage of relief to be uniformly applied. Based on the language of the amendment, I would expect the same approach to be take here as well.
Here are two links to more information about the proposed changes to the Homestead Exclusion from the Pennsylvania School Board Association: