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Lawmakers say sales tax offers more tax relief

September 22, 2005|by DON AINES

chambersburg@herald-mail.com

CHAMBERSBURG, Pa. - Pennsylvania Gov. Edward G. Rendell has called a special session of the General Assembly next Wednesday to take another look at property tax relief through an amended Act 72, but legislators from Franklin County have their own ideas for tax reform.

"Many of us have being trying to put real property tax reform at the top of the agenda," said state Rep. Rob Kauffman, R-Franklin/Cumberland. "He wants to revisit Act 72, which failed across Pennsylvania."

Kauffman said he and "dozens" of other representatives favor funding school property tax relief with a 5 percent sales tax on all goods and services, with the exception of medical goods and services.

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Pennsylvania has a 6 percent sales tax, but food, clothing and services are exempt. Kauffman said supporters believe a broader sales tax will generate enough revenue to eliminate school property taxes.

"I like it because it would tax consumption rather than your home," he said.

State Sen. Terry Punt, R-Franklin, of Waynesboro, Pa., said he also looks favorably at a combination of an almost across-the-board sales tax and gambling money to eliminate property taxes. Gambling money could be put in an escrow account and used to balance school district budgets if sales taxes are insufficient, Punt said.

Only 111 of 501 Pennsylvania school districts adopted Act 72 by the May 30 deadline, according to state Rep. Patrick Fleagle's office. The law provides property tax relief through a combination of slot machine revenues, increased earned income taxes adopted by districts and a "back-end" referendum requiring voter approval for tax increases above the rate of inflation.

The Tuscarora School Board was the only district in Franklin County to vote for the plan, which requires districts to raise the earned income tax from the 0.5 percent to 0.6 percent and hold a later referendum to set income tax rates for the purpose of offsetting property taxes.

The governor's amended bill eliminates the mandatory income tax increase, while still using gambling revenues to lower taxes, according to the governor's office.

"That's not going to encourage any school districts to opt in," said Punt. "Their big concern is the referendum."

"The bill would deliver property tax relief to all homeowners directly from the state," Kate Philips, Rendell's press secretary, said Wednesday. When the Legislature and governor approved slot machine gambling, they committed to use gaming revenues for tax relief, she said.

"We want to make sure that money goes to homeowners as promised," Philips said. Gaming will eventually produce approximately $1 billion annually for tax relief, she said.

If approved, the bill will apply to all districts and the local referenda provision remains in place, Philips said. Otherwise, there would be no controls on how much school boards can raise taxes, she said.

Pennsylvania is the only state "without some kind of spending controls" on local school systems, she said.

Fleagle, R-Franklin, disagrees with mandatory participation by school districts.

"Everyone's all for local control until the locals don't do what you want," Fleagle said. "Then they want the state to step in."

The May 30 deadline in the original bill was "artificial" and districts should have been given longer to decide, rather than be forced to raise income taxes to participate, Fleagle said. The process should have been open-ended, allowing districts to evaluate how Act 72 worked in the districts that opted in, he said.

"Why punish school districts for being cautious with taxpayers' money?" Fleagle said.

Fleagle expects a number of tax relief plans to emerge during the special session.

"Everybody's going to get a whack at this," he said.

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