THE KEYSTONE STATE IS CONSIDERING SAYING GOODBYE TO THE PROPERTY TAX: IS THIS THE RIGHT STEP?
Pennsylvania Lawmakers are pushing a bill forward that would eliminate property taxes while raising sales and income taxes. The bill would also start taxing residents’ retirement funds. The obvious question here is, can the Keystone State do better?
You can read more about the proposal in Newsweek here: https://www.msn.com/en-us/money/markets/plan-to-scrap-property-tax-could-see-other-taxes-rise/ar-AA1Z0tuq?ocid=BingNewsSerp.
The proposal is Pennsylvania Senate Bill 929, introduced by Senators Chris Gebhard and Doug Mastriano.
This Newsweek article by Giulia Carbonaro points out that property taxes across the nation have increased sharply since the pandemic spurred a surge in home values. Carbonaro highlights the boom in housing demand driven by low borrowing costs and a chronic nationwide shortage of inventory.
As a result, lawmakers, especially in GOP-led states, are seeking ways to relieve homeowners of their property tax burden. In many instances, they’re looking at eliminating property taxes entirely. While homeowners would certainly welcome such a move, not everyone is going to like that idea. Eliminating all property taxes would put pressure on local governments and school districts to replace that lost revenue. The result is likely to be higher income and sales taxes for everyone, and that’s sure to raise some opposition from people who don’t want to see their taxes raised in order to give someone else a break.
The Tax Foundation ranked all 50 states and DC according to property taxes as a percentage of owner-occupied housing value. Pennsylvania’s property taxes are the 12th highest in the country according to that measure.
There’s no question that eliminating the property tax might help many Pennsylvanians. However, there might be a problem if we view the big picture. In our May 18, 2026 Grassroots Corner, we cited the White House Council of Economic Advisers for the types of taxes that harm economic growth. Their studies review corporate, personal income, consumption, and property taxes. Three of the studies cite the corporate tax as the most harmful, with one placing it second. The personal income tax, conversely, ranks second in three and first in one. All four studies cite property taxes as the least harmful to economic growth and consumption taxes as the second-least harmful.
We respectfully disagree with the Council of Economic Advisers about the relative rankings of property taxes and consumption taxes, such as the FAIRtax. Property taxes discourage both wealth creation and neighborhood improvement. We want property owners to fix and upgrade their houses and prevent blight. Property taxes discourage that activity. The FAIRtax taxes property only indirectly when it is consumed, not when hard work and savings create it – and improve neighborhoods.
If Pennsylvania genuinely wants to help its people, it should, as the Council of Economic Advisers (“CEA”) recommends, target property taxes. But the state should first target corporate and personal income taxes under a state-level FAIRtax. Pennsylvania currently has a sales tax rate of 6%, with an option for local governments to impose an additional sales tax of up to 2%.
If Pennsylvania were to broaden its sales tax base to include both goods and services, as the FAIRtax does, and limit spending to a level sufficient to maintain current government services, the CEA believes it could have a state sales tax rate of 5.41%. Gross Domestic Product would increase to $13.4 billion. Tax-induced out-migration and brain drain would halt.
Nine states have gone a long way towards the CEA goals by having no personal income tax. We know of seven more where there are proposals to eliminate this tax. None so far have a true state-level FAIRtax with prebate, but state-level FAIRtax initiatives are underway in Georgia, Alabama, and Nebraska. The first of these states to cross the FAIRtax finish line will enjoy enormous benefits and help refocus Pennsylvania.
I would love to hear from you if you know of a movement underway in your state to eliminate the income tax.
---------------------------------------------------------
TAKE BACK CONTROL!