We have been asked to study the property tax systems of several communities in Mercer County, Pennsylvania. Mercer County is located in the northwest corner of Pennsylvania. Historically, it has been the home of gritty factory towns, mining, and agriculture. Mercer County, PA has 19 municipalities, three of which are cities: Sharon, Hermitage, and Farrell. Like much of the industrial Midwest, community and individual prosperity peaked around 1960. As a result, the population has been in decline, from 127,000 in 1960 to around 110,0000 in 2022. Statewide, the PA population has increased by 12.4%, while Mercer’s has dropped by 8.5%
Moreover, beginning in 1960, the percentage of people living in poverty has waxed and waned through the subsequent decades. In 1960, Mercer County’s poverty level was 15.4%. Subsequently, the United States saw the Great Society, the industrial collapse of the 1970s and 80s, and the advent of savage globalization. Sadly, not much has changed since then. In 2022, the poverty rate crept back to 12.4% from a relatively halcyon 9.9% in the 60s and 70s.
Will the future be brighter? No one knows, but demographics can give us an indication. Pennsylvania is a state whose population is aging. It has one of the highest concentrations of those over 65 in the US, at 19.1%. Florida still holds first place at 21.3%. Only the influx of immigrants (domestic and international) in and near Philly has helped Pennsylvania increase its youth population.
What Can We Fix?
But the people of Mercer County and Pennsylvania need not be in denial or just accept this situation. In the blink of an eye, the future world can belong to polities that can adapt. After over a quarter-century of working experience in Pennsylvania, it’s tempting to say inertia always wins. But it doesn’t.
Sitting pat is not a strategy for success. Pennsylvania was economically on top of the world in the late 1800s and early 1900s. Thanks to the formal partnerships of extractive industries, railroads, and steel, plutocrats ruled with an iron fist over workers. The predominantly immigrant workers fought and organized through the early decades of the 20th century, until the 1940s, when the smoky towns and their citizens were able to gain a measure of prosperity and respect.
By the late 70s and 1980s, the steel industry had completed its prolonged collapse in the United States. Lack of investment, profit-taking, and employee/owner overconfidence resulted in the disappearance of an industrial mainstay.
Out of the rubble came: not much. Instead, an accepted philosophy of managed decline led to cannibalizing existing local economies, shrinking them, and subsidizing them with money from elsewhere (nearly always from taxpayers). Like other states, Pennsylvania enacted programs such as LERTA (Local Revitalization Tax Assistance Act) and KOZs (Keystone Opportunity Zone) abatement programs. Although the laws looked hopeful, no provisions or metrics were implemented to determine if they worked at any level. City Controller of Philadelphia Alan Butkovitz commissioned an investigation of KOZ activity in Philly; he was mildly optimistic, but complained of a lack of metrics to measure success.
At this point, the casual reader may conclude that this is the most banal ‘inside baseball’ kind of story. But suppose you strip away the euphemisms and adjectives. In which case, you find a system that has no real idea how to revitalize an economy and how to really help communities. Political and economic thinking in Pennsylvania government is stuck in neutral.
This is not to knock the government, but choosing guesswork championed by consultants and EcoDev dreamers is like the Donner Party taking advice on an easier route to avoid the hard work.
This hard work must be financed by taxes. But the residents of Pennsylvania have inherited a state and a local tax system that was seemingly put together in the horse and buggy era. And if some county or city thinks it can improve the current system, then tough luck.
Going back to Mercer County, it is easy to point out the faults in the current system. In Pennsylvania, there are 2,560 taxing jurisdictions. Also included are 500 school districts that levy taxes. Mercer County has a merciful eighty-nine tax jurisdictions, including the county itself.
Each of these jurisdictions has a dog’s breakfast of taxes, all of which cost money to collect, administer and parse. Moreover, each of these taxes is flat, which means regressive, which also means those starting out are disadvantaged.
Proportionately, tax bills fall mostly on wages, job creation, and––with the levy on building values––the labor and capital needed to construct and maintain structures. It’s no surprise, then, that younger people reaching their prime family and economic potential say, ‘what’s the use?’ So, North Carolina, here we come!
That’s an easy way to shrink the tax base and leave an aging population in place. But, unfortunately, seniors vote, and elected officials are sensitive to this. That’s why attacks on the property tax (in favor of economy-killing taxes on sales and wages) are so widespread and self-defeating.
With another recession looming, Pennsylvania risks slipping further behind because the powers that be have refused to acknowledge reality and, in response, to change what they’re doing. Or not doing.