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Tax plan needs work

January 27, 1997

Pennsylvania's Republican lawmakers this week said they'd like to reduce property taxes during their 1997 session. But agreement on just how to do that seems far off, and we hope they heed the counsel of Majority Leader John Perzel, who says that without a clear plan for how municipalities and school districts would make up for lost property-tax revenue, voters will reject the whole idea.

The first step in property-tax cut initiative is to pass the so-called "homestead exemption" to the state constitution, so that homes can be taxed at a lower property-tax rate than business and commercial property. That's the easy part.

Figuring out how to make up for that lost tax revenue will be more difficult because, as we warned last year, different citizen groups have conflicting interests. Elderly people on fixed incomes don't want to be taxed out of their homes, while younger married couples with children (who may be living in rental housing) wouldn't want to pay higher income taxes.

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Local sales taxes are always tricky, since areas with higher populations of low-income people find them regressive and businesses see them as an incentive for customers to shop elsewhere.

And then there's the problem that changing the tax structure poses for economic development. What pleases fixed-income residents - shifting the property-tax burden from homes to businesses and relying more heavily on income taxes - may be turn-offs for new industry.

For that reason, we would urge consideration of a statewide approach to the property-tax reduction issue. Perhaps a statewide sales tax or an income-tax surcharge, with the proceeds dedicated to school construction and operation, would work.

Maybe neither one of those approaches is the answer. But what Senate Republicans are talking about now - allowing every level of government to work out its own taxation plan, to be approved after the fact by the voters - sounds like a recipe for mass confusion. This plan needs a lot more work.

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