Eliminating school district property taxes; imposing county and school district taxes; establishing the School District Emergency Fund and the School District Property Tax Elimination Fund; consolidating Articles II and III of the Tax Reform Code of 1971; in preliminary provisions relating to sales and use tax, providing for definitions; in taxation generally relating to sales and use tax, providing for exclusions and for transfer to county sales and use tax accounts; in preliminary provisions relating to personal income tax, providing for definitions; and making repeals.
HB1649, titled the School Property Tax Elimination Act, would eliminate school district real property taxes in Pennsylvania beginning with the first fiscal year after December 31, 2029, except for delinquent taxes. To replace that revenue, the bill creates a new county-level sales and use tax structure and requires each school district to levy a local personal income tax of up to 1.88% on resident taxpayers. It also expands the personal income tax base to include certain retirement benefits, while preserving exclusions for Social Security and similar benefits, and it reorganizes and consolidates major portions of the Tax Reform Code related to sales and use tax and personal income tax.
The bill would substantially rewrite Titles 53 and 72 of the Pennsylvania Consolidated Statutes by repealing the school district property tax model and replacing it with a combination of county sales tax revenue, local school district income taxes, and state-administered distribution funds. It establishes the School District Emergency Fund and the School District Property Tax Elimination Fund, creates new county sales and use tax accounts, and directs how revenues are collected, credited, and distributed to school districts. It also expands taxable sales categories, adds new rules for remote sellers, marketplace facilitators, hotel occupancy taxes, and rental reductions for tenants, and makes numerous conforming changes to sales tax administration, enforcement, and personal income tax definitions.
The bill’s stated purpose is strongly pro-elimination of school property taxes, and the findings section frames the current system as regressive, unsustainable, and harmful to retirees and working families. Based on the text alone, the bill is presented as a major tax reform measure intended to hold school district funding harmless while shifting the tax burden to sales and income taxes. No committee transcripts or votes were provided, so there is no recorded legislative debate or vote history to indicate broader support or opposition.
The most likely points of contention are the replacement taxes and who bears them: the bill would add a 2% county sales and use tax and a local school district income tax, while also broadening the tax base to include some retirement income. Other likely flashpoints are the mandate that landlords pass through property tax reductions to tenants, the creation of new administrative boards and funds, and the complexity of the transition away from property taxes. The bill also appears to shift tax burdens toward consumption and earned income, which could draw criticism from consumers, businesses, landlords, retirees, and school finance stakeholders even as property owners may support the elimination of school property taxes.