I want to let voters know that a ballot question will appear before them when going to the polls on Tuesday, Nov. 7. Voters will be asked if they are in support of amending the state constitution to allow local taxing authorities, counties, municipalities, and school districts the ability to increase the homestead exemption from 50 percent of the median assessed value to 100 percent of the assessed value of the property. House Bill 1285 passed the General Assembly this summer and House Bill 147 in 2015, which is necessary to amend the constitution since a bill must win approval by the Legislature in two consecutive sessions before it can be presented to voters via referendum.
The current 50 percent homestead exemption is a constitutional amendment that was adopted in 1997. An example of how the exemption currently works is a municipality has three homesteads—one assessed at $50,000, one assessed at $100,000, and one assessed at $200,000. The median assessed value in that taxing jurisdiction is $100,000. At this time, the municipality may exempt up to 50 percent—in this case $50,000—of all homestead properties from taxation. So, the homestead assessed at $200,000, is taxed on $150,000 of its assessed value; while the homestead assessed at $50,000, is fully exempt from taxation by that jurisdiction.
If the constitutional amendment were approved and the local taxing authority decides to set the exemption to 100 percent, no homestead owner would have to pay property taxes. However, the local taxing authority would then need to replace that lost revenue by imposing another tax or raise the tax rates on something like the personal income tax (PIT) or sales tax. Millage rates is the only item prohibited from increasing on other real property to make up the difference. Enabling legislation by the General Assembly would then be required to allow the local taxing authorities to increase taxes and establish guidelines for local governments to follow.
It’s important to note that this law would only affect homesteads and farmsteads – one’s primary residence and the property upon which it is built – and not businesses or vacant property. Commercial properties are not a part of the potential reductions, and homeowners with multiple residences would be able to lower the assessment of only one of their properties.
The ballot question will appear as follows: “Shall the Pennsylvania Constitution be amended to permit the General Assembly to enact legislation authorizing local taxing authorities to exclude from taxation up to 100 percent of the assessed value of each homestead property within a local taxing jurisdiction, rather than limit the exclusion to one-half of the median assessed value of all homestead property, which is the existing law?”