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Board hears tax reform pitch

November 11, 2004|by DON AINES

chambersburg@herald-mail.com

CHAMBERSBURG, PA. - The Chambersburg School Board will have to decide by next spring whether it intends to participate in Act 72, the Pennsylvania law passed earlier this year that would shift the funding of schools away from property taxes toward a combination of income taxes and gambling revenues.

Districts have to adopt a resolution by May 30, 2005, imposing a new income tax to be eligible for slot machine revenues earmarked for property tax reduction, Business Manager Rick Vensel told the board Wednesday.

Districts now collect an earned income tax of 0.5 percent. That could be raised to at least 0.6 percent with the extra money being used to offset property taxes, Vensel said. In November 2005, the district would have to hold a referendum that, if approved, could raise the earned income tax more to offset property taxes further.

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Voters could also choose to replace the earned income tax with a personal income tax that also taxes interest and dividends, but not Social Security or pensions, Vensel said.

The higher income taxes would be combined with gambling revenues to reduce school property taxes, but by when and by how much is still unknown, Vensel said. The law requires the state to collect $900 million in gambling revenues from slot machine operations before any money is distributed for tax relief, he said.

"The gamblers in Pennsylvania will have to lose $2.7 million before that takes effect," Vensel said. That could take two or more years because no slot machine parlors are in operation at this point.

If a district raises income taxes, Vensel said, the tax could not actually be collected until the state is ready to disburse gambling money.

If the district participates in tax reform, Vensel said districts will have to have proposed budgets ready in January rather than June. That is because a budget proposal including a tax increase above the rate of inflation has to be approved by voters in the spring primary, usually in May, according to the law.

All owner-occupied homes and farms are eligible for tax relief, but the owners have to apply for the exclusion, Vensel said. The first round of applications were sent out to 52,400 property owners in Franklin County last month and a second mailing will take place in December to those who did not respond, Vensel said.

The size of the reduction will be the same for every eligible home or farm in a district. The formula determining the size of the reduction, however, will vary from year to year based on gambling revenues, the amount of earned income or personal income tax collected and the number of properties that receive an exclusion.

"Thank you, I think," board member Eugene Gayman said after hearing Vensel's explanation of the complicated law.

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