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Panel says tax reform could mean more taxes for some

November 17, 2006|by DON AINES

WAYNESBORO, Pa. - About a dozen residents of the Waynesboro Area School District got an idea Thursday of what Act 1 school property tax reform will mean for them during a public hearing by the district's seven-member tax study commission.

If voters approve a tax-shifting plan in the May primary, homeowners can expect a homestead exclusion of at least $309, but for many, that will be more than offset by higher earned income taxes on wages and salaries, or the creation of a broader personal income tax.

The hearing was to get input from residents, and no decision has been made as to what nonbinding recommendation on tax shifting will be made to the school board, Commission Chairman Terry Eisenhauer said.

The $309 exclusion is based on raising the district's share of earned income tax from the current .5 percent to 1.2 percent, the minimum allowed by Act 1, said John Frey of Public Financial Management, which is acting as a consultant to the commission. If a house's property tax is $1,000, the exclusion would lower it to $691.

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The maximum homestead exclusion of $574 would require raising the earned income tax to 1.8 percent, according to income tax rate calculations.

"It doesn't matter the size of your house, everybody gets the same homestead exclusion," Frey said. There are about 12,000 owner-occupied homes in the district, he said. Frey later said that, as more houses are built in the district, the amount of the homestead exclusion could decrease.

About 25 percent of district housing is rentals and the people living in them will not get a homestead exclusion, Frey said. A renter making $20,000, for example, would pay $140 more based on a 1.2 percent earned income tax.

For homeowners, the income break-even point is about $44,000, Frey said. Households making above that will pay more in income taxes than they save in reduced property taxes, he said.

The median household income in the district, according to the 2000 U.S. census, was $41,483, Frey said, a figure that has increased during the past six years.

With Pennsylvania's first slot-machine casino opening this week, Act 1 calls for a percentage of gaming revenues to be used to increase homestead and farmstead exclusions. Before that happens, Frey said, the state has to set aside $500 million from its share of the gambling proceeds.

Many commissions are recommending raising taxes by the minimum figure because, while taxes can be raised in the future, it is unclear under Act 1 if they can later be lowered.

"With all the ifs, ands and buts thrown into the equation ... We don't know what we're going to get," resident Amos Miller said. Approving Act 1 will mean "a higher bite out of our wages," he said.

"The bottom line is, it's a tax increase for probably the majority of the people in the district," resident Dave Unger said. "We're asking for the public to approve a tax increase."

District voters can approve or disapprove whatever referendum the board places on the May 15 primary ballot. Whether rejected or approved, another plan can be placed on the ballot in the November 2009 election, Frey said.

If approved, the tax shifting plan would go into effect July 1, 2007.

The commission will meet again Nov. 30, but will hold off making a recommendation until the Dec. 12 school board meeting, Eisenhauer said. The board will not vote on the measure until the statutory deadline nears in March, Superintendent Barry Dallara said.

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