Property Tax Crisis in Pennsylvania
GroundSwell, May-June 2006]
Long-gathering anti-property-tax momentum has come to a head this
year in Pennsylvania. It is an election year for the governor, all
the state representatives, and half the state senators; candidates
are caught up in trying to prove that they are more strongly opposed
to property tax than their opponents are.
Besides the threat this poses to the 21 Pennsylvania taxing
jurisdictions (mostly cities) using land value tax, shifting away
from property tax could damage Pennsylvania's economy and exacerbate
the growing divide between the propertied and the landless here.
Still, opposing property tax has become so popular that rational
concerns have been swept aside. Land value tax advocates are just
beginning to come to grips with this crisis.
The Governor's Race
Ed Rendell, the incumbent Democrat, has never been a friend of
land value tax, favoring the corporate-welfare approach to economic
development (just as he had when he was mayor of Philadelphia). He
has championed a bill for property tax relief that will undoubtedly
pass. Basically, it gives aid to school districts from gambling
revenues, contingent on their subjecting themselves to restrictions
that would inhibit their ability to raise property taxes in the
future. An earlier proposal with more stringent restrictions passed
a year ago, but so few school districts opted into the plan that a
newer bill has been passed with milder restrictions. The only good
thing to say about Rendell's plan is that other plans are much
The Republican candidate is Lynn Swann, a Hall of Fame wide
receiver for the Pittsburgh Steelers during their Superbowl dynasty
in the 1970s. Swann proposed a reform modeled after California's
Proposition 13, which ties assessments to the original purchase
price, cuts property tax rates, and limits both individual
assessment increases and jurisdictions' ability to increase property
tax revenues. Swann's proposal has not caught on, even with his
Republican colleagues in the legislature. Still, he will undoubtedly
attack Rendell for not having a stronger anti-property-tax measure.
The lack of support for Swann's plan by the Republican legislators
would have been fortunate except that the they have something much
worse in mind -- replacing local property taxes with statewide
taxes. Sales taxes are the favorite choice, but some legislators,
under pressure from frightened retailers, have advocated income
The independent candidate, Russ Diamond, is championing the worst
plan of all -- to completely replace property tax with sales tax.
While Diamond has no chance of winning, similar plans are being
pushed hard by a number of legislators, mostly Republican.
Republicans do not have a monopoly on destructive pandering to the
anti-property-tax crowd; many Democrats are doing the same thing.
Republicans are more aggressive about it, probably because it plays
better to their constituents. Rather than a fight between right and
left or Republicans and Democrats, it is a fight between pandering
and principle, between politics and economics.
Ironically, it was the Republican members of Allegheny County
Council (Greater Pittsburgh) who stood up as a block for proper
reassessment even though their own council districts were the
wealthier districts, where assessments were going up, and even
though Republican communities within all the districts got the
biggest assessment increases. It was the county Democrats who defied
the law and sold out their own constituents in order to pander to a
vocal (and monied) minority. Not surprisingly, the Republicans lost
seats on county council.
For a while, Democrat Bill Robinson, a longtime champion of land
value tax, joined with the Republicans and blocked the Democrats
from degrading the county's assessment process. He eventually caved
under relentless pressure from Democratic Party leaders.
A Movement That's "Mad As Hell"
The most vocal opponents of abolishing property taxes have not
been leaders of large landholding corporations (the real winners
under almost any plan on the table). Rather, it has been angry
citizens, most of them elderly, fueled by opportunists who fancy
themselves champions of the people and who assume something to be
true if it gets a good audience response. Spokespeople for these
organizations get away with making outrageously false statements
because the elderly have become sacred cows in Pennsylvania (which
is second only to Florida in its percentage of elderly people), and
nobody wants to stand up to elderly citizens.
Here are some of the more egregious lies:
- * They accused counties of artificially raising assessments in
order to avoid raising tax rates, even though counties have
actually been failing to reassess as required by law, and have
raised rates instead.
* They accused Allegheny County of driving home owners out of
their homes when the county foreclosed on 750 properties, all of
them residential. Actually, only 96 properties were tax sales;
the rest were foreclosed by creditors. Most owners of the 96
made payment arrangements, so very few were actually taken by
the sheriff. Almost all of the ones taken were absentee owned,
and quite a few had been long vacant.
* A recent article quoted a leader of one of these groups as
saying that, because of property tax, houses in her municipality
were either not selling or selling for less money. However, data
from the State Tax Equalization Board shows that property values
in her municipality were not only rising, but rising much faster
than values in neighboring Pittsburgh, which has a lower
property tax and a higher income tax.
* Several conservative legislators have charged property tax
with being "un-American," violating the principles of
our founding fathers, even though property tax was a distinctly
American response to prevent the landed aristocracy of Europe
from being replicated here. Our most respected founding fathers,
including William Penn, Thomas Jefferson, Tom Paine and Ben
Franklin, explicitly championed real estate taxes.
Although the proposals advocated (other than by Lynn Swann) are
not modeled after Proposition 13, the "mad as hell"
campaign style is very much like that of Prop 13's founder, Howard
Jarvis. His post-victory book was titled I'm Mad as Hell. It, and
the campaign he led, was patterned after the movie, Network, in
which a bombastic (and psychotic) newscaster made inflammatory
speeches to his audience. The newscaster's shining moment was when
he persuaded thousands of Los Angeles viewers to open the windows of
their apartment buildings and shout to each other, "I'm mad as
hell, and I'm not going to take it any more." Jarvis loved that
scene and incorporated the newscaster's approach into his campaign.
The point of Network had actually been to show how destructive to
society it is when cynical manipulators use misguided
attention-seekers as pawns. That point was lost on Jarvis and his
emulators. Indeed, the popular Pennsylvania group "Stop Taxing
Our Properties," which has perhaps the worst grasp of economic
reality and the most contempt for opposing viewpoints of the
anti-property-tax bunch, was started by a longtime Pittsburgh
talk-show host upon his retirement. After years of his and his
listeners' repeating misinformation back and forth to each other
until it sounded like Gospel to them, he launched the reform his
call-in "experts" had sold to one another. It was indeed
the mad leading the mad.
The Fairy-Tale Tax Campaign
The anti-property-tax movement has coalesced with "The Fair
Tax Campaign," which began by advocating a shift from federal
income tax to federal sales tax. This campaign is based on a web of
more professionally contrived and sophisticated deceptions.
Elaborate fairy tales have been concocted about how much money sales
taxes would raise, about how one did not have to pay the tax if one
did not buy anything, etc.
Sales tax is popular with wealthier conservatives who spend only a
fraction of their income on consumer purchases and acquire income
producing assets with the rest. Apart from poll (head) taxes, sales
tax is the most regressive tax ever devised. It is also destructive
to competition, as new businesses lose the advantage of not paying
income tax during the initial years before their first net profits.
Although The Fair Tax Campaign has fizzled at the national level,
it has found new life as an alternative to property tax. While a
high national sales tax is a bad enough idea, Pennsylvania's
shifting to a heavier sales tax would be economic suicide. The
Federal government can at least use tariffs to tax imports at the
same level it taxes domestic sales, but states cannot tax items
imported from other states.
Even the 6% sales tax Pennsylvania already levies makes us lose
business to Delaware, which has no sales tax at all. The mapping
program Google Earth shows only three shopping malls within a retail
"dead zone" that extends fifteen miles into the
Pennsylvania side of the Delaware border, but shows dozens of malls
concentrated near the border on the Delaware side. Thousands of
Philadelphians drive through this dead zone every weekend to shop in
Delaware. A substantial shift from property tax to sales tax would
destroy what little retail is left in the Pennsylvania city of
Chester and extend the dead zone well into south and west
Power Beyond Reason
Although The Center for the Study of Economics, led by Joshua
Vincent, has had considerable success over the past three decades by
reasoning directly with public officials, none of us are prepared
for a statewide power struggle. Allentown, which adopted and
retained land value tax in two referenda, is the only city which has
seen a public campaign for land value tax.
However, broad constituencies are developing in opposition to
features in the various schemes to replace property tax. These
constituencies have power but little economic expertise about real
estate taxes, while we have the expertise and little power. It is
the perfect situation for serious organizing.
A Time for Saving Communities
Last fall, we formed Saving Communities to organize people to
support measures that enhance "freedom, equality and respect
for the commons." Although we prominently feature land value
taxation, our mission is neither limited to a single issue nor
focused on creating ideological single-taxers. Rather, it is to
attract a broad base of support for winnable campaigns. Renowned
real estate assessment expert Ted Gwartney is the president.
It will become a national or international organization, but our
first campaign is to stop the erosion of property tax in
Pennsylvania. We began by asking what kind of help we needed in
order to win and who might give it to us, and then by asking what
those people cared about and how our proposals address their
concerns. We are online at http://savingcommunities.org.
Finding and developing leaders
Our first need was a core group of non-ideological leaders who
were better able to relate to outsiders on their own terms than we
are. I presented a series of topical seminars, each targeting a
particular constituency. Emily Cleath, an experienced organizer,
became excited by the potential impact of land value tax on issues
she cares about. Emily is now our primary organizer, working without
pay until we can raise enough money for salaries. Her credentials
are impressive. With an MS degree in Public Policy and Management,
she has researched, written and presented public policy news briefs,
provided technical training and mentoring at several organizations,
worked with neighborhood organizations on housing and crime issues,
served as an intern with a Pittsburgh City Councilman, and worked
her way up from organizing apprentice to lead campaign organizer in
the Service Employees International Union.
A person of action, she did not wait to master the underlying
theory. As soon as she saw that land value tax was an idea she
wanted to support, she asked what we were going to do about it and
what she could do to help. It was exactly the kind of attitude we
were looking for. We got donations from local Georgists, most
notably $1,000 from Harold Kyriazi, allowing us to print literature,
letterhead and envelopes. When I traveled to Pennsylvania's capitol,
Harrisburg, to line up support, my hotel bill was paid for by a
libertarian acquaintance of Harold's who did not know much about
what we were advocating, but who decided it must be worthwhile if
Harold was involved.
The Founders' Plan
We labeled our proposal "The Founders' Plan" to
emphasize that our plan is not a gimmick, but is based on what
America's founders advocated. The plan has two planks, each of which
are optional for each taxing jurisdiction.
One allows all taxing jurisdictions within the state to shift from
property tax to land value tax. (We anticipate having to include a "farmers
held harmless" provision that would let farmers pay the
equivalent property tax if it is lower than their bill under a land
The other allows each municipality to create a fund equal to the
estimated amount of real estate tax collected from residents aged 65
and over. The fund would be distributed to these older residents on
a per capita basis. This plank is modeled after a proposal by Tom
Paine, considered the first social security plan ever proposed.
We produced a general brochure highlighting the advantages of our
plan over other plans, and another explaining why our plan is the
only plan in line with the principles of America's Founders
[enclosed in this Groundswell issue]. We also have a draft of a
brochure showing why our plan gives land-efficient small businesses
a competitive advantage over large, inefficient corporations. We
intend to make a special brochure targeted to each major interest
group we identify.
People who do not normally pay attention to us are desperate for
alternatives to what is now being proposed. A representative of the
Pennsylvania School Boards Association said they would be
particularly interested in the option of grants to the elderly, and
all of the municipal associations are looking for alternatives that
let them retain control over their taxing and budgeting processes.
Ours is the only plan that does that.
Ours is also the only plan that calls for no increase in state
subsidies. Merchant associations are so strongly opposed to state
sales taxes that we expect less hostility from them than we would
usually get. (Retailers often hold the most valuable land outside
large central business districts, and most of them have parking
The Pennsylvania representative of the National Federation of
Independent Businesses is most interested in our assertion that The
Founders' Plan would give the competitive advantage back to small
businesses. He wants all the documentation we can provide on that.
Although most of the plans we oppose are backed by conservative
politicians, people at the conservative Commonwealth Foundation were
as interested as anyone in our alternative. Their chief policy
analyst, along with a research intern, met with me for two hours.
They later asked about the endorsements by Tom Paine and Milton
Friedman and about the source of the statistic that 3% of the
landowners control 97% of the land.
Politicians Seeking Alternatives
Although the purpose of our trip to Harrisburg was to line up
support rather than talk directly to politicians, we did visit with
the staff of representative Dwight Evans of Philadelphia. Thanks to
work done by Joshua Vincent and community leaders who themselves had
been educated by Vincent, Evans already supports the land value tax
option in Philadelphia.
Evans is a also a member of the Pennsylvania Legislative Black
Caucus. I spoke to his staff about finding sponsors and supporters
for our bill, and gave them copies of our paper, "Land and Tax
Issues for the African American Community." That paper is
online at: http://savingcommunities.org/issues/race.html
The easiest point to grasp, and for black leaders to take to their
constituents, is that home ownership is much lower among blacks than
among whites. What the other proposals have in common is that they
give relief to home owners by increasing the tax burden on renters.
Only The Founders' Plan gives relief to home owners and renters
alike by shifting the tax burden to absentee landholders.
Evans's staff counseled me on how to pursue the issue. Among other
things, they suggested that we draft a sample of the legislation we
have in mind. They thought that the Legislative Black Caucus would
indeed support the bill, and that other politicians would support it
Adopting A Broad-Based Strategy
Although this is issue will be determined mostly by political
clout, of which we have very little, we also have the only proposal
with very little opposition. We must tap opposition to other plans
to have serious impact.
Rather than asking land tax advocates from across the country to
write to Pennsylvania legislators who, by now, don't care very much
what people from outside their own state think anyhow, we are asking
supporters from around the world to help us do broad-based
organizing -- finding constituents who will help us fight against
replacing property tax with sales and income taxes. Land value tax
is offered, not as a utopian panacea, but merely as a better
alternative than the plans they don't like. They don't have to learn
about Henry George or the Law of Rent; they only have to learn
enough to be on our side.
For example, we have a brochure and a web page explaining how
reducing property tax gives a competitive edge to labor-efficient
big businesses over land-efficient small businesses, and how our
plan has the opposite effect. Wal-Mart, Home Depot and others are
prime examples of land inefficiency. A team can get our message out
to groups on the Internet by doing searches on "Wal-Mart,"
"Home Depot," "small business," "giant
corporations," etc. This will turn up thousands of web sites,
most of them sympathetic to shifting taxes off small business and
onto big business. We can win support from the web site owners by
writing personal, individualized notes to them.
A State-To-State Template
The anti-property-tax movement has been spreading from state to
state, leaders in each state copying the efforts of the previous
state. We have been studying prior struggles in other states,
particularly in Alaska and Maine, where anti-property-tax referenda
were defeated, to develop our own counterstrategy. If we succeed
here, we can also campaign in other states and ultimately overturn
anti-property-tax strongholds like Massachusetts, California and the
It is not going to be easy, but it can be done if we roll up our
sleeves and do what it takes to get it done. As Henry George wrote:
How true is the old fable! The wagoner, whose wagon
was stuck in the rut, knelt down and prayed to Jove to get it out.
He might have prayed till the crack of doom, and the wagon would
have stood there. This world -- God's world -- is not that kind of a
world in which the repeating of words will get wagons out of mire or
poverty out of slums. He who would pray with effect must work! --
Henry George, "Thy Kingdom Come"