Eliminating the property tax?

In my previous post I noted that the property tax, at least as levied in Pennsylvania, has major flaws.  The Pennsylvania Coalition of Taxpayer Associations is calling for the complete abolition of the tax, noting that past efforts at reform have not solved the fairness issue. 

A tax that brings in billions of dollars, however, cannot simply be eliminated.  If you are a Tea Party type, you may believe it can, but reasonable people recognize that an alternative revenue source would be necessary.  

The state income tax and the state sales tax are both candidates to bring in more funds.  The Pennsylvania income tax is a flat percent with lots of exclusions.  The legislature could increase the rate, make the tax progressive, or eliminate exclusions like pensions.  

The six percent sales tax could also be raised, but to make up for the loss of the property tax, it would have to be around 15%, which is ridiculous and would drive residents and businesses out of the state.  What we could do is apply the sales tax to more items.  According to one speaker at the Thursday hearing, some exceptions are downright bewildering.  Diet coke is taxed; bottled water is not.  Deodorants are subject to sales tax; antiperspirants are not--or is it the other way around.

We could also apply the sales tax to services.  We live in a “service economy;” taxing those services would bring in a huge amount of revenue--and make the tax less regressive.

It is important to remember, though, that most policy changes in the U.S. are incremental.  Comprehensive reform too often leads to unexpected consequences.  It’s why we often do pilot programs or provide sunset clauses.  Most politicians (and most citizens) fear the unknown, and eliminating a major tax like the property tax would have all kinds of unpredictable ripple effects.  Here is one possibility--local control of school districts would disappear.  

OK, enough on property tax.  Tomorrow I’ll start bashing Republicans again.