Pa. voters to decide how they'll be taxed

May 13, 2007|By JENNIFER FITCH

FRANKLIN COUNTY, PA.-Pennsylvania voters headed to the polls Tuesday not only have candidates for local offices before them, but also questions that could affect the way they are taxed.

All voters in Franklin County will be asked whether they want to raise the earned income tax to further reduce property taxes beyond the amount tied to gambling revenue.

Proposed income tax increases and the corresponding property tax reductions vary by school district.

The questions are a new feature for state voters and come courtesy of Act 1 of 2006.

Voters "need to know how Act 1 will affect them personally. ... They should also be thinking about others," said Tim Kelsey, a Penn State professor who has lectured about the law in communities.

If the income tax increases pass, the real winners will be retirees without substantial income. Their property tax bills would be lower, and they don't have taxable wages.


Losers would be renters, who would pay more in income taxes, but not save money in property taxes.

"If you raise the income tax, that will affect working-age people, renters, others in the community who have income," Kelsey said.

A break-even threshold exists for working property owners and varies by school district. Generally, the threshold is about $50,000 household income in Franklin County.

Households with more than $50,000 earned income would lose money, paying an income tax increase greater than the property tax savings.

"If their income is below that break point, they're going to pay more than the homestead/farmstead" tax savings, Kelsey said.

Many taxpayers could be surprised to learn "that there are many people who would pay more taxes," said Rick Vensel, Chambersburg Area School District's business manager.

Households below the $50,000 threshold ultimately would save money.

Approved homestead applications, necessary to receive property tax cuts, total 33,829 in Franklin County, Tax Assessor Gary Martin said.

Decisions made during Tuesday's primary election cannot be changed until 2009, according to a publication prepared by Kelsey. Income tax changes made to lower property taxes are revenue-neutral for school districts.

"There are going to be as many dollars lost as gained," Vensel said.

"No matter how they vote, the school district will continue to have the (same amount) of taxes coming in," Kelsey said. "The real property tax will remain the most important tax for the school district."

Under Act 1, school districts are capped in the amount they can raise property taxes from year to year. Each school district is assigned an inflationary index, which is slightly more than 4 percent for all Franklin County school districts.

Fannett-Metal School Board feels it needs to raise property taxes more than the index allows, so it created a ballot question seeking an additional 8.53 mills of property taxes from voters.

Vensel speculated that people believe slot machine revenue will be funding schools, although that money strictly is funneled to property tax reductions.

"The school district receives no more revenue as a result of this tax shift," said Barry Dallara, superintendent of the Waynesboro Area School District.

The gambling revenue is distributed to communities based on relative wealth and the tax burden per student. Cities such as Philadelphia and Pittsburgh will receive a higher percentage of money, while Vensel said Chambersburg will be in the lowest 5 percent to 7 percent of districts in allocations.

"Chambersburg will not get its fair share," Vensel said.

Regardless of a community's feelings about Act 1, involvement is mandatory across the state.

"The biggest misconception, I think, is people think (the vote) is an option for school districts to participate," Kelsey said. "That's different from the past votes on tax reform."

He identified several other misconceptions that he believes exist.

"This is something there's not a lot of organized public education about," Kelsey said.

Vensel said provisions in the law restrict school districts' "promotion" regarding it, largely tying their hands when it comes to public education. Meetings and hearings connected to the appointed tax study commission were permitted.

"This is a public taxation issue that people have to decide on their own," Vensel said.

"It's a matter of whether or not people have accessed the information. ... We want the people to know as many facts as possible about how Act 1 will affect them and people overall," Dallara said.

Few people have been seeking out information about the law, school district officials said.

The number in Chambersburg has been minimal, and maybe three have contacted the Waynesboro Area School District in recent weeks.

No more than 30 people turned out for any Act 1 meeting or hearing over the past several months, Dallara said.

"I'll be very interested to see the fallout of what happens next week," Kelsey said.

If the ballot questions fail, Kelsey feels the Pennsylvania General Assembly might develop "a sense of urgency" to revisit methods of tax reform.

ยท To keep track of the updated vote counts during Tuesday's Pennsylvania primary election, go to

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