Advertisement

Tax cuts will take time

February 02, 1999

In 1997, Pennsylvania voters approved the most sweeping change in state taxation since 1948. But the constitutional amendment, designed to allow local governments to craft their own mix of taxing options, still needs local voters' approval, and not one of the 500 school districts affected is expected to put it on the ballot this fall. This is a complicated issue that demands voters' patience and attention.

The key to the legislation is a provision that would allow the local taxing authorities to offer a "homestead exemption." It would allow a portion of the assessed value of a resident's primary residence to be exempt from property taxes. Second homes or property that is rented to someone else doesn't qualify.

To make up for revenues lost to the homestead exclusion, school districts would be able to raise the earned-income tax from its present level of 0.5 percent to 1.5 percent. Another requirement: All existing school taxes - the head tax levied in some areas, for example - would have to be repealed.

Advertisement

What makes all of this doubly complicated is that whatever combination of tax proposals local governments devise must be approved by the voters in another separate vote.

When these changes were being proposed, we cautioned that they could divide voters into warring interest groups, since the proposal is weighted in favor of those homeowners on fixed incomes, and against renters, who get no break, but who could be hit with the higher earned-income tax.

We also noted that there's a potential downside for economic-development efforts, since highly-paid executives might hesitate to local in an area where income taxes pay the largest part of government's expenses.

In short, the reservations we had about these changes remain, and local governments need to carefully study the impact of any proposal to change the local tax structure. It's been more than 50 years since Pennsylvania's last major tax overhaul, and if it takes another year to get the job done right, it will be time well spent.

The Herald-Mail Articles
|
|
|