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State’s school boards are considering shifting taxes

Voters will decide in May on various income tax and property tax proposals.

HARRISBURG — Nearly all Pennsylvania school boards are required to ask voters this spring whether they want to raise local income taxes in exchange for cutting property taxes by at least 25 percent, and groups watching the referendums say the outcome will hinge on which voters turn out and whether they believe the shift is in their best interest.

“When you’re doing tax shifting, everybody is going to take a look at what this means to them,” David Davare, director of research services for the Pennsylvania School Boards Association, said Thursday. “If I’m going to lose half of my paycheck, I may not vote for it.”

Voters in all but three of the state’s 501 school districts will be asked in the May 15 primary election whether they want to shift part of the local cost of funding public schools to either a higher earned-income tax or a new local personal-income tax.

Most school districts already collect an earned-income tax, which is levied on wages and other compensation. None collects a personal-income tax, which applies to both wages and unearned income such as interest and dividends, but not to pensions or Social Security benefits.

The referendums are required this year under a seven-month-old law that promises to deliver up to $1 billion a year in tax cuts financed by slot-machine gambling. The slots revenue is not expected to become available until next year, at the earliest.

The law required school boards to seek recommendations from local tax-study panels on which tax to use and what rate to propose.

According to the results of a PSBA survey released Thursday, panels in at least 342 districts recommended increasing earned-income taxes, while personal-income taxes were recommended in at least 54 other districts.

School districts have until March 13 to approve their ballot questions. The law exempts school boards in Philadelphia, Pittsburgh and Scranton, where wage taxes are already comparatively high, from having to place a local tax question on the ballot.

The tax shifts are expected to provide the greatest benefit to low-income homeowners, while more affluent homeowners could end up paying more in total taxes because the property-tax reduction will be too small to offset their income-tax increase. Renters would pay higher income taxes without seeing any other tax reduction.

In addition to the tax-shift referendums, school boards proposing property-tax increases above the inflation rate must seek voter approval in a separate ballot question.

Key deadlines

Key deadlines for school boards to prepare 2007-08 budgets and local tax questions:

March 1: School districts seeking permission to increase property taxes above the inflation rate without voter approval must file their request for exceptions from that limit with county or state authorities.

March 13: School boards must adopt referendum questions calling for reducing property taxes by increasing local income-tax rates.

March 21: Education Department and county courts must rule on referendum exceptions.

• May 15: Voters cast ballots on local tax shifts. Voters in some districts also decide whether to permit property taxes above the inflation rate.

June 30: School boards must adopt final budgets.

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Source: Pennsylvania Department of Education.

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