The House finance committee voted along party lines to pass a property tax reduction bill. With the reduction in property taxes, there will be an increase in other taxes to make up for the funds.
The bill, which has already passed the State Senate by a 27-22 vote, would allow nearly all of the 501 school districts in Pennsylvania to cut as much as $2.2 billion in property taxes.
The House version of the Taxpayer Choice Act will also include the option of boosting the personal income tax instead of the earned income tax.
“Basically what this bill says is that wage earners will pay more taxes,” said Bellwood-Antis superintendent Rodney Kuhns. “In a working community like we have, more people will be paying more taxes. Places with more senior citizens who own homes would benefit from this plan, but most of the Bellwood-Antis residents are wage earners and would end up paying more taxes.”
If the bill passes, there will be a referendum placed on the November ballot for voters to make the decision. If the referendum passes, school districts would enact a tax-shifting plan.
The plan would not go into effect for the Philadelphia, Pittsburgh, Harrisburg, Chester-Upland and a few school districts who are participating in Act 50, a similar property tax reduction plan enacted during the 1990s.
“We did a study on Act 50 four or five years ago,” said Kuhns. “There were more negatives to enacting that plan than positives.”
David Atkinson, chief of staff for Senator Robert Jubelirer, believes that this will give voters a decision in how their taxes are enforced.
“I think this will pass through the House and be on the November ballot,” said Atkinson. “Over the years there have been many forms of property tax relief that have been proposed and one of the difficult issues is dealing with the people who rent where they live. They are paying some form of property tax with their rent. Every plan has had language dealing with the rental issue, but it is impossible to enforce.”
The plan was crafted as an alternative to the plan of Governor Ed Rendell. In the governor’s plan, the state personal income tax would increase 2.8 percent and the money from slot machines would provide property tax relief.
“There is a compromise plan in the works,” said Atkinson. “There would be an exchange of taxes on the local level (wage tax for property tax) and additional tax relief through a state mechanism which could be the money generated from slot machines.”
Atkinson said the House plan for a personal income tax increase isn’t likely.
“That is what shot down the Casey tax relief plan in 1987,” said Atkinson. “There is a personal tax on the federal and state level and the voters weren’t keen on bringing it to the local level. That is what caused the Casey plan to be rejected.”
Tyrone School District business manager Cathy Peachey says she hasn’t done the calculations on what the tax shift could be, but has some concerns with the plan.
“This plan doesn’t address the equity in funding,” said Peachey. “If you live in an affluent school district, there is more funding for that district. Here in Tyrone, we have to fight against that. This also puts a lot of work on the school districts to do all the calculations of what this tax shift will mean to the residents. This will shift a good portion from the property owners to the wage earners, but to prepare the numbers and have them ready for the November ballot will be very tough.”
The House is scheduled to vote on the bill next week.
