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(June 2003) Property taxes are among the oldest and most enduring taxes levied by government. In Pennsylvania, all types of local governments use them, and property taxes are a staple of the tax system. Still, despite their widespread use in Pennsylvania and other states, many taxpayers say they’re onerous and unfair. In fact, they love to hate property taxes. Is this perception just opinion - or reality? IssuesPA took a closer look.

Exactly what are property taxes?

In Pennsylvania, property taxes essentially involve real estate - primarily land and buildings. Several other states expand the definition of "property" to personal property, such as cars and business inventory. In Pennsylvania, counties, municipalities, and school districts levy the tax on the value of land and buildings owned by individuals and businesses. State government in Pennsylvania doesn’t impose a property tax.

County assessment offices - there are 67 counties in Pennsylvania - establish the market value of each property and then apply a predetermined ratio to establish its "assessed value." The ratio could range from 20 percent to 100 percent, and varies from county to county. From this "assessment," each taxing jurisdiction levies a uniform tax millage rate against the assessed value of each property. Because of differences in assessment policies and practices, it’s impossible to compare millage rates from county to county.

But not all real estate is taxed. The Pennsylvania Constitution says the state legislature can exempt certain types of property from property taxes. Through the years, the legislature has excluded actual places of worship, places of burial, charitable and education institutions, and government property. Other state laws approved by the legislature and signed by the Governor grant partial relief from the property tax, including the state’s Clean and Green program, the Keystone Opportunity Zone (KOZ) programs, the Local Economic Revitalization Tax Assistance Act (LERTA) and certain "homesteading" provisions.

And because the state Constitution requires all taxes to be levied uniformly, all pay taxes at the same rate within the same taxing jurisdiction. This means businesses pay at the same rate as individuals for the same assessed value of property.

How much is collected?

Those who say they pay a lot in property taxes probably are right - at least relatively speaking. In fiscal year 2000, Pennsylvania’s local governments collected $9.7 billion in property taxes - more than state government collects in income or sales taxes. Property taxes represent almost two-thirds of all local tax collections in Pennsylvania.

School districts collect the largest amount, $6.8 billion or 70% of all property taxes in Pennsylvania. The rest is split between municipalities and counties in almost equal proportions. School property taxes grew 68% between 1990 and 2000 compared to 26% for municipalities and 46% for counties. Overall property taxes increased 57% during the 1990s.

Note these numbers represent statewide averages. Actual burdens vary considerably from one taxing jurisdiction to another, one county to another, and one region to another. They also vary for personal and business property owners. A complicated process? Yes, it is.

Local Property Tax Collections in Pennsylvania
($million)

So what does all this mean?

It’s clear property taxes are a significant source of revenue in Pennsylvania. Local governments are the primary beneficiaries. Property taxes generate huge amounts of money that help local governments - school districts, counties and municipal governments - to function. But many questions linger. How does Pennsylvania’s property tax structure stack up against measures of a "good" tax? Who really pays Pennsylvania’s property taxes? How does Pennsylvania’s property tax structure compare with those of other states? And how has the growth in tax-exempt property in Pennsylvania affected local finances?

Stay tuned as IssuesPA tackles these questions, and more.