Legislators pessimistic about tax shift plan

Three local state lawmakers say they are opposed to a proposal to eliminate property taxes in favor of increasing the tax on earned income as a way to raise revenue.

State Sen. Gene Yaw, R-Loyalsock Township, and state Reps. Garth Everett, R-Muncy and Rick Mirabito, D-Williamsport said Thursday at the Lycoming County Conversation District breakfast that elimination of property taxes in favor of increasing income tax would be the wrong direction to take.

Not a good idea, Yaw said. That might result in increasing income tax by 40 percent and it favors weathier communities in the suburbs of larger cities, he said.

Yaw said it would mean property taxes on buildings such as the Holiday Inn, where the breakfast was held, and Kohl’s would be gone.

He described the financial situation in Harrisburg comparable to a physician giving a patient difficult news about his or her health.

“Not a very warm and fuzzy picture,” Yaw said.

Everett also was against the proposal because of the same issues Yaw brought up about the loss of taxes on commercial properties.

“The bad news is we have a $1 billion deficit with revenues going down,” Everett said. “The economy has improved, but not at the rate it should,” he said.

Everett pointed toward losses in revenue related to tobacco and the loss of $550 million to $600 million in Medicaid reimbursements as problematic. “We’re losing $175 million out of the tobacco settlement fund,” Everett said.

Everett also said sales and income taxes haven’t gone up enough to keep pace with inflation and offered an idea of a consumptive use tax for businesses that pull water out of bodies of water and don’t pay for it.

“We haven’t raised revenue in three years,” Mirabito said, adding that while there are affluent in every community, the property tax removal wouldn’t benefit the constituents he represents. The median income of residents in the city he represents is $32,000, which is only $8,000 above the national poverty line, he said.

Mirabito also doesn’t want to see property tax removed because the economy depends on it and it’s working in places such as the former Brodart neighborhood.

Instead, Mirabito said he supports introduction of a severance tax on gas companies. “By not having a severance tax on natural gas industries we’ve foregone $800 million,” Mirabito said.

While the legislators agreed on the property tax issue they differ over the severance tax.

Yaw said he would caution against changing the law that regulates natural gas impact fees and said it might end up repealing how counties receive natural gas impact fees distributed through the state Public Utility Commission. A severance tax might repeal the natural gas impact fee and dump it into the general fund, according to Yaw who added that wouldn’t be good for communities depending on money to run conservation and agriculture programs.

Everett said another elephant in the room is the pensions for state employee pensions that are “skyrocketing,” and he said the Legislature is searching for ways to modify the pension system.

It’s not a care for those already retired or who are vested in their pension programs, Everett said.

“It’s modifications for new hires,” he said.