Pennsylvania State Rep Suggests Eliminating Property Taxes

A state representative in Pennsylvania has a proposal that has homeowners thrilled, public school systems concerned, retirees terrified, and everyone in the state looking for the fine print.

Frank Ryan, a state representative from Lebanon County, has proposed that Pennsylvania eliminate property taxes completely and use other sources of funding to support public schools.

Ryan’s bill, House Bill 13 or “The School Property Tax Elimination Act,” calls for a local personal income tax of 1.85 percent on all taxpayers, a local sales tax of 2 percent on all items already subject to state sales tax, and a local sales tax of 2 percent on food and clothing items, which are presently exempt from state sales taxes. The bill proposes to exempt the tax on food for anyone receiving Supplemental Nutrition Assistance Program benefits and to exempt Social Security income. However, retirement income would be taxed at a rate of nearly 5 percent.

No Success Without Senior Endorsement

Ryan said the overall results of the bill would be to reduce the burden of property taxes and school-system support on homeowners and distribute the responsibilities more evenly.

He said despite the tax on retirement income, seniors should support the bill because they are “often hit hard by property taxes.” Ryan also suggested landlords lower rent by the amount of property taxes saved unless they can prove that they did not raise rents when their property taxes rose in the first place.

Ryan said in a press conference intended to promote the bill and clarify how it would work that he will “drop the proposal if he does not get significant support from senior citizens.” He reported about half of seniors in the area have a favorable view of the concept but said that more would support it if they did not misunderstand the proposed retirement income tax. That tax of nearly 5 percent would apply to earnings in a retirement account but not the initial capital invested.

The state of Pennsylvania has an ongoing issue with property taxes because the amount needed by local school systems is rising at a rate of about $500 million a year. It seems unlikely the proposal will gain traction this fall simply because the senior population in the area is resistant to it. However, Ryan is one of more than a dozen lawmakers publicly announcing his intention to create a plan to deal with “the property tax issue” when lawmakers return next month.

What Does This Mean for Tax Lien Investors?

The state of Pennsylvania has one of the more notoriously complicated tax sale systems already, so eliminating property taxes in the state would likely not affect many tax lien or tax deed investors who are not Pennsylvania residents. Pennsylvania’s tax sales are regulated on a county-by-county basis, with some counties permitting a nine-month redemption period, some allowing the homeowner to redeem only under certain circumstances, and some requiring homeowners to file objections and “invalidate” the tax sale in order to redeem their homes.

At PIP Group, we operate in states with investor-friendly laws that make the results of a tax lien or tax deed investment as predictable and positive as possible. You can learn more about where we invest and why at PIPGroup.com

About the Author

Charles Sells is the founder and CEO of The PIP Group, a turnkey service provider that focuses on investments in distressed real estate assets including tax liens, tax deeds, traditional foreclosures, fix-and-flips and long-term cash flow acquisitions. He has been involved in tax lien investing for over 20 years, during which time The PIP Group has grown to become one of the largest agencies of its kind with nearly 1,000 individual and institutional investors worldwide.

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