Pennsylvania’s Duty to Tax Fairly
Property taxes are the fees many love to hate, but critics rarely offer a realistic plan of what could replace them. Pennsylvania provides additional reasons to despise property taxes. Harrisburg has almost entirely abdicated its core responsibility to ensure that the assessment of property taxes is administered fairly and uniformly across the commonwealth.
The current reality is that property taxes form the core revenue source for almost every municipality, county, and school district across Pennsylvania. The Tax Foundation calculates that in Pennsylvania, 29.5% of all state and local tax revenues are derived from property taxes, exceeding what the state collects from income taxes (25.4%), sales taxes (17.5%), or corporate income taxes (4.3%).
Yet, this bedrock of local public finance is arguably the most arbitrarily and capriciously administered. Pennsylvania performs minimal oversight on the administration of property tax. Individual counties manage virtually all aspects of the assessment process, a system that results in outdated property valuations and inconsistent tax burdens for homeowners and businesses.
Actual real estate values rarely remain fixed for very long. Market conditions and real estate values are constantly in flux. Accurate and fair property tax collection relies entirely on consistent and accurate assessment of current real estate values. One of the biggest problems with Pennsylvania’s system – though far from the only one – is its lack of any requirement for individual counties to conduct regular and routine updates to property values. Counties are instead allowed to rely on “base year” assessments conducted years or even decades earlier. Some counties in Pennsylvania have values set as far back as 1969, which, when it comes to the reality of current real estate markets, may as well be an eternity ago.
In many counties, inconsistent assessment practices have forced judicial intervention. In the 1970s, future state supreme court justice Nicholas Papakados, then sitting on the Allegheny County Court of Common Pleas, named himself as special master of the Allegheny County office of property assessments as part of a consent decree challenging the fairness of local assessments. A quarter century later, in 2001, similar litigation again forced Allegheny County to conduct a mass assessment of all local real estate; it did so again in 2012. While some counties voluntarily conduct reassessments – such as those beginning or ongoing in Lycoming, Mercer, Schuylkill, Warren, and Lackawanna counties – these are one-time reassessments, with no plans for being repeated.
It does not have to be this way. In neighboring Ohio, state law requires every county to conduct a full reassessment of all taxable property every six years. The county must also update those values every three years. In neighboring Maryland, the state – not individual counties – conducts a mass reassessment of all property values every three years. Such uniformity is the antithesis of current practices across Pennsylvania.
Relying on judicial intervention to correct unfair taxes is a cure worse than the problem and is in no way a best practice for administering a modern tax system. Litigation is often county-specific and does not apply elsewhere. Such a system creates uncertainty for property owners and can inhibit real estate investment.
Some argue that it’s too costly to administer regular and recurring property assessments. The truth is, such assessments are even costlier when they are done less frequently, as depreciated data must be updated and corrected. Costs become more manageable as assessment systems are regularly maintained.
Many fear large changes in their tax bills following a mass reassessment. Again, this problem is entirely caused by the lack of routine updates to assessment values, not as a result of reassessments themselves. Pennsylvania also has strong anti-windfall laws that prevent taxing bodies from bringing in more tax revenues after mass reassessment. If needed, Harrisburg legislators could strengthen anti-windfall laws further. Any large shifts in tax bills are a symptom of how inaccurate assessments had become prior to a reassessment.
The irony is that the Pennsylvania constitution requires uniformity in the law and particularly in taxation. Yet there is no legislative or judicial application of that standard to how we assess and collect property taxes across the state. Pennsylvania must find a way to conduct one of its core responsibilities more fairly.
