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Legislators hopeful about plan to reform Pa. property taxes

January 22, 2006|By DON AINES

chambersburg@herald-mail.com

CHAMBERSBURG, PA. -

Legislators in Harrisburg, Pa., sound both hopeful and anxious about passing a school property tax reform plan before spring, although the Pennsylvania House and Senate are approaching the issue from different directions.

"I would sign the Senate bill if it came to me, but I think there needs to be a little more work" on it, Gov. Ed Rendell said during a Jan. 9 appearance at JLG Industries in McConnellsburg, Pa. He said then he expected to see a bill by February.

Rendell said he expected to see a bill that would produce $1.5 billion to $2.25 billion in property tax relief for homeowners, with $1 billion of that coming from gaming revenues and the balance from tax shifting. The governor said he expects any legislation to include a "back-end referendum" provision, giving homeowners a say in future tax increases in the state's 501 school districts.

"It's never had the focus it has now," State Senate President Pro Tempore Robert C. Jubelirer said at the same appearance as Rendell. "I'm hopeful we'll get a bill passed ... There's not a day that goes by that there's not negotiations going on."

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A lot of negotiations might be needed to resolve differences in the House and Senate tax reform proposals.

"There is no sentiment in the Senate for the House plan," Jubelirer said. The House version "imposes enormous tax increases on the business community," he said.

"Nobody has said to me, 'Please rehash Act 50 and Act 72,'" state Rep. Rob Kauffman, R-Franklin/Cumberland, said later that week, referring to two earlier property tax relief laws.

Act 72, signed into law in 2004, combined gambling revenues, increased local earned income taxes and the back-end referendum, but only 111 school districts opted into the plan, according to the Pennsylvania School Boards Association.

"The House version would increase the state income tax and open up the sales tax to some more items, not food, but amusements and some services," said state Rep. Pat Fleagle, R-Franklin.

The state tax would increase from 3.07 percent to 3.29 percent under the House plan and, combined with a broader sales tax and gambling revenue, reduce the property tax on homes by about half, Fleagle said.

Kauffman and Fleagle both said they supported an earlier plan to eliminate property taxes, largely through increases in sales taxes, but that garnered only 61 votes in the House.

The Senate plan would create property tax reductions in 2006 if voters in school districts approve local referenda in the May primary to increase the earned income tax. That money would be used to offset a decrease in property taxes, and the earned income tax could be further increased to further cut taxes in later years, if approved by a local referendum.

Like Act 72, the Senate version requires voters to approve school district property tax increases that are above an inflationary index set by the state. The back-end referendum requirement would take effect in May, if a bill is signed into law.

The deadline for referenda to be included on ballots in the May 16 primary is March 7, according to the 2006 Pennsylvania election calendar.

Both the Senate and House proposals include the back-end referendum and allow districts to share in slot machine revenue.

The Pennsylvania School Boards Association, with some reservations, supports the House version, according to its Web site. In a Senate hearing on the House bill Wednesday, however, representatives from businesses largely panned it because the broader sales tax would adversely affect their industries.

"If people are looking for a completely painless way to reduce property taxes, it isn't there," Fleagle said.

While there are big differences in the two bills, there was one area of agreement on the complicated issue of tax reform.

"If it was easy to come up with a consensus, we would have passed it 20 years ago," Fleagle said.

"If it was easy, we would have done it long ago," Jubelirer said.

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