Third and State: Unintended Consequences? Property Tax Elimination Increases Taxes on the Middle Class to Reduce Taxes for High Income Families
ITEP Work in Action“Let’s start with the impact of property tax elimination on different groups of taxpayers. While we have not examined the tax incidence of the current SB 76 bill, the Institute on Taxation and Economic Policy (ITEP) did estimate for us the tax incidence of a similar proposal several years ago. That proposal, like the current SB 76, promised to eliminate school property taxes through an increase in the sales tax rate to 7 percent while applying it to more services, and an increase in the personal income tax rate (to 4.1 percent under the old SB 76 and to 4.34 percent under the new SB 76). One reason SB 76 now has a larger PIT increase is that the earlier proposal didn’t raise enough revenue: even the “new and improved” SB 76 does not raise enough revenue to eliminate property taxes permanently and to adequately and equitably fund schools going forward.”