1 Tax Commission Study
In the Commonwealth of Pennsylvania, all school districts
are required by Act 1 of 2006 to set up a citizen Tax Commission. The
task of the commission is to examine the demographics and tax structure
of their community. They must decide whether to shift from property
taxes to some form of income tax to fund the local public schools. Any
increase in income tax requires a reduction in Property tax to equal
it. There can be no net gain in tax dollars by the school district.
Act 1 requires all school districts to place a question
on the primary election ballot (this is called a front end referendum).
They must ask voters if they want to increase the school district's
Earned Income and Net Profits Tax (EIT), or implement an EIT or a Personal
Income Tax (PIT) or shift the current EIT to a PIT.
This shift in taxes would then require school districts
to reduce property tax rates for those who own an eligible homestead
or farmstead property.
Businesses will not receive any reduction in
property taxes. The tax reduction is only on the primary residence.
People who own more than one property in the district will receive a
single property tax rebate, not one for each property they own. A person
must live in the property to get the rebate. A hunting cabin or vacation
home does not qualify for the tax reduction. Every eligible property in
the district gets the same amount of rebate regardless of value of the
property. An $80,000 home and a $300,000 home get the same rebate amount. Farmers can also qualify for a second Farmstead tax reduction.
This referendum question on the ballot must contain
a rate or an increase in the rate of income taxation that is sufficient
to generate enough revenues to allow the school district to provide
property tax relief that is equal to at least 50% of the maximum permissible
homestead/farmstead exclusion. According
to the PA Constitution, the maximum permissible homestead/farmstead
exclusion in any school district is equal to one-half of the median
assessed value of eligible homestead/farmstead property in the district.
Act 1 of 2006 says a district is not required to propose an
EIT rate greater than 1%.
The Tax Commission must consider: the history of local
taxation, the rates and revenues from taxes, how much of the total revenue
the district receives is from these local taxes, Projected revenue form
these taxes, demographics of the community like age, income, employment
and property use (residential, farming, business, industrial)
Obtain a copy of the district's annual budget. It is
a public record. It will report sources of revenue and what percentage,
of the whole revenue amount, each source provides.
the - Tax Fairness: video from Local Tax Reform Education Project
Which change do you support? How high would you
raise income taxes to reduce residential/farmstead property taxes?
Question 1 - "Do you favor imposing an additional
______% earned income tax? The revenue generated from the increased tax
rate will be used to reduce taxes on qualified residential/farmstead properties
by $___________. The current earned income tax rate is____%.
Question 2 - "Do you favor converting the
school district's earned income tax to a personal income tax at ____%?
The revenue generated from the increased tax rate will be used to reduce
taxes on qualified residential/farmstead properties by $___________ and
to replace the revenue from the school district's current earned income
tax. The current earned income tax rate is____%."
Question 3 - Shall we impose a Personal income
tax of ____%? The revenue generated from the tax rate will be used to
reduce taxes on qualified residential/farmstead properties by $___________.
Once you decide - What did your school's tax commission propose? What was the outcome of the vote in May 2007?
Every two years, in the odd numbered years, the district
can propose a further
shift from property taxes to income taxes via a front end referendum.