The average resident or business owner in Pennsylvania may feel at times like the local tax structure is a byzantine thicket of rules, impenetrable to anyone who isn’t an accountant by profession.
What might be even more worrisome to hear is that some local government officials feel more or less the same way about it.
“I thought I really had the experience [as a former U.S. Army major general and high school principal] and with my years of experience as a county commissioner that I could make a difference when we got to that point in our career, my life, to do a tax reassessment in Indiana County,” County Commissioner Rod Ruddock told a recent gathering of state representatives. “I thought I had the leadership qualities, the background to make it happen effectively and efficiently.
“I was way off base, way off base. I was not prepared for it.”
Ruddock was speaking at a hearing of the Pennsylvania House Finance Committee’s Select Subcommittee on Tax Modernization & Reform. The panel, led by Rep. Eli Evankovich, R-Murrysville, is tasked with looking at ways to improve how local government is funded in the state, among other things.
Evankovich told Ruddock and other testifiers that the purpose of the committee was to find the pain points that were seen at the local level.
“We want to hear about your challenges,” he said. “We want to hear about the things that are broken, and hopefully we will be able to garner some good information from this hearing.”
In talking about his county’s reassessment process, Ruddock described an ordeal where he and his fellow county officials were at the mercy of contracted accountants and left without guidance from the state. As residents struggled to understand how their tax burdens were changing, county officials similarly struggled to get them good answers.
“I think … getting your appeal boards properly educated and trained as to what they are to do, would have lessened about 30 percent of our grief right from the beginning,” he told the committee. “People did not trust what we were doing because they looked at these appeal boards of people you draw from the community that know nothing about real estate. They know nothing about deciding what the values of property would be.”
He also echoed calls by legislators to rethink funding local government and school operations strictly through property tax. Ruddock said that school districts in particular get disproportionate focus from taxpayers because they see so much of their property tax payment going to pay for education, estimating 60 to 75 cents of every dollar went to schools with the remainder split between municipalities and counties.
Evankovich wanted to hear Ruddock’s reaction to the concept of reducing state subsidies of county government and allowing local governments to raise more revenue directly.
“It would be very, very difficult,” Ruddock replied. “It’s the unfunded mandates, representative, that really are hurting us. I mean, look at county government. You know all the things we do in county government. Everything is going up in the burden of cost. Our [social services] side is just really moving at a clip that we can’t keep pace with.”
The panel also heard from David Massaro of Massaro Properties, a commercial real estate firm based in western Pennsylvania that also does business in Ohio and West Virginia. Massaro said that the variations in local and state taxation schemes force him to keep compliance staff on the books when he’d prefer to spend those resources elsewhere.
In each of the 133 municipalities of Allegheny County alone, Massaro said, there are a vast array of different wage taxes and real estate taxes to track.
“You can be working one mile over in Robinson Township and move over to Moon Township and there’s a different tax rate … There is a different tax rate for your permitting process, for your school taxes,” he said. “So it becomes very confusing.”
Massaro said that while he found West Virginia to be just as complex as Pennsylvania, his peers in other states described much different situations.
“We deal with out-of-town developers that come into Pennsylvania from, say, Atlanta, Dallas, New York,” he said. “They’re astounded at the complexity of our real-estate tax situation here in Pennsylvania. … It’s very difficult sometimes to calculate for out-of-state developers. And then … they’re surprised at how high our property taxes are.”
Evankovich questioned whether developers in other states might see higher income or sales tax as similar burdens, but Massaro replied that property taxes are almost always the biggest concern.
“When you’re doing a development for $70 million, and you see what that property tax will be or can be once that property is fully assessed, that’s the number they’re focused on,” Massaro said. “Because that’s going to be a number that they have to pay year in and year out.”
The future of Pennsylvania’s property tax is in flux as Sen. Mario Scavello, R-Tannersville, has proposed eliminating it and replacing it with a mix of income and sales tax. Republican gubernatorial candidate Scott Wagner has also said he favors doing away with the property tax.
