Published: March 31, 2007 11:36 pm      

Schools turn to voters for decisions on taxes

In Harrisburg, the governor’s staff calls it “landmark tax reform.”

In the trenches back home, officials call it a complicated mess of legislation that’s anything but tax reform.

But when May 15 rolls around, it is the voters who will deliver the verdict on the so-called “Act 1” by making this choice:

Should a school district tax what people earn or tax the house they live in?

It is a question that prompts heated debate.

“People want property taxes cut with no pain,” state Sen. John Wozniak said. “Personally, I say that if you’re making it, you should be paying it.”

State Rep. Thomas Yewcic, who voted against Act 1, disagrees:

“This is just a tax shift that doesn’t address the real problem,” Yewcic said. “Most working families will lose.”

Act 1 gets its nickname from being the first bill passed in last year’s special legislative session.

It earmarks $1 billion in revenue from the state’s new casinos and gambling parlors for property-tax relief, especially for seniors.

And it requires every school district to give taxpayers the choice of how they want to pay their share of school taxes.

In this region, school officials are wary.

“Folks need to get out and vote and express their opinion,” said John Coleman, president of the Somerset Area School District board. “You don't want to miss this, because it is your money at stake.”

But whether they like it or not, each school district must have something on the ballot, and most in the Cambria-Somerset area followed the recommendations of their local tax study commissions, which advised them on what to propose.

What to tax?

First, these local groups looked at the types of taxes.

Pennsylvania school districts rely on property taxes, which are based on the worth of a taxpayer’s house and land, and are not considered to be a true measure of ability to pay.

“One hundred years ago, you could argue that the value of your home was a legitimate way to determine your wealth,” Wozniak said, “but that’s no longer the case.”

The local study commissions were to recommend either a higher earned income tax rate, which is levied on wages, or a new personal income tax, which is levied on income and stocks and other investments.

In exchange, the property taxes would be reduced.

In Cambria County, school districts unanimously adopted their local tax study commissions’ recommendations.

But in Somerset County, these four districts rejected the local recommendations:

• Rockwood Area instead will place a 0.8 percent personal income tax on the May 15 ballot.

• Salisbury-Elk Lick will ask voters to approve an increase of 0.4 percent in its earned income tax, rejecting the tax study group’s recommendation to keep the tax at its current rate of 0.5 percent.

• Shade-Central City will ask voters to approve a 0.4 percent increase in the earned income tax rate.

• Turkeyfoot Valley is asking voters to approve an increase of 0.3 percent on the ballot.

Sorting it out

So if voters approve the increased income tax rates – or a new personal income tax – are they guaranteed to save money?

That, too, depends on whom you ask.

“There will be winners, and there will be losers,” said Northern Cambria school board member Don Kline.

“I think the senior citizens, the farmers and homesteaders will be the people who come out ahead,” he said. “It will help retired people because Social Security income is not considered as earned income. Any other group in there probably won’t see a big change.”

Renters could stand to lose the most, Kline said.

“Now they will be paying additional taxes on their earned income,” he said, “and they won’t see a reduction in real-estate taxes because they don’t own property. That’s part of the shifting.”

Others think that Act 1 is merely a foot in the door to a higher and higher statewide income tax.

“This new law is anything but tax relief,” said Rex McQuaide, president of the Richland School District board.

“It basically forces school boards to raise taxes a little bit every year whether they need it or not,” McQuaide said. “It’s a use it or lose it. I fully expect every school district to raise taxes every year.”

Those in Harrisburg don’t argue with that.

‘A first step’

“It’s a first step, but not the last,” said Mike Storm of the Pennsylvania Department of Education.

“The legislature and governor have stated their intent to build on this first step,” he said.

Most agree that those who would benefit the most from shifting from a property tax to an income tax are low-income households, especially those with a single wage earner.

“Most working families will break even or lose,” Yewcic said.

“If you have a higher income, you’ll lose. It doesn’t address the real problem.”

Other officials worry that Act 1 is too complicated for voters to follow.

“Act 1 gives people the power to decide how their local taxes should be levied. The downside of it is, it’s so confusing,” said Barbara Parkins, superintendent of the Greater Johnstown School District.

At the Central Cambria School District, Superintendent Susan Makosy agrees.

“I think that shifting the emphasis on funding education from real-estate taxes to other taxes is a positive move,” Makosy said. “However, I do have a few concerns with Act 1.

“The wording of the referendum being placed on the ballots may be confusing to voters,” she said.

“There are both pros and cons to the voting community. Senior citizens may favor the resolution while the renter may reject it because their bottom line in taxes will increase.”

So on May 15, will voters approve an income tax for the sake of reducing the property tax?

“People are going to figure out what they would pay under the income tax and what they pay in property taxes and vote accordingly,” Wozniak said.

“Everybody’s going to do their own arithmetic.”