Property taxes in Harrisburg, Pennsylvania could go up more than 100% in a worst-case scenario the city currently faces.
Harrisburg is in a unique property tax position. Roughly half of its property is tax exempt, largely because so much property is owned by the State of Pennsylvania. The city has been able to make ends meet the past five years with assistance from the state financial recovery property known as Act 47.
Act 47 allows Harrisburg to collect an additional $12 million per year through a local services tax and an elevated earned income tax. When the city leaves Act 47, it stands to lose that tax money.
Act 47 will come to an end in September 2021. Earlier this year, Harrisburg officials tried to persuade the state legislature to change the law and allow the city to continue collecting the extra taxes. However, lawmakers passed a budget without giving the city the taxing authority it requested.
The Pennsylvania House will be back in session for 10 working days in September and Harrisburg Mayor Eric Papefuse is hoping legislation can be passed allowing the city to continue collecting taxes after leaving Act 47.
Without a change in state law, Harrisburg could be forced to drastically raise property taxes. The exit plan calls for taxes to go up 20% next year, another 20% the year after, and 43% in 2021.
Pennsylvania is one of only nine states that do not impose reassessment timetables or standard assessment methods on local governments. If Harrisburg conducted regular property reassessments, tax revenues could be more stable.
Another issue with unstable property taxes in Pennsylvania relates to the state’s uniformity clause in the state constitution. The clause limits how much local lawmakers can tailor real estate taxes to different types of property. The clause reads: “All taxes shall be uniform, upon the same class of subjects.”
Similar clauses appear in the constitutions of other states and have been interpreted as mandating uniform taxation only within individual sub-classes of property. However, in Pennsylvania courts have ruled that all types of property are a single class. This prohibits taxing commercial and industrial property at higher rates than residential.