Anita Dufalla, Post-Gazette
The state Legislature's latest foray into tax reform requires school districts to put referendums on the May 15 ballot that will pit wage earners against retirees, renters against homeowners and school districts against each other.
Meeting the mandates of Act 1, the Taxpayer Relief Act of 2006, has been a frustrating experience for the state's school districts. Each had to devote inordinate amounts of time and money to develop a referendum that will give their voters a chance to change the way school taxes are collected.
The result is 498 unique referendums that will be considered by voters in their respective school districts next month. Pittsburgh, Philadelphia and Scranton were excluded from the referendum requirement.
The referendum questions, customized for each school district, will ask voters whether they want to reduce their school district property taxes by increasing the current earned income tax or creating a property tax.
Kevin Fischer, president of the Baldwin-Whitehall school board, said the referendums create "class warfare" between senior citizens and the working class and will pit school districts against each other.
If people in Baldwin-Whitehall vote to raise the earned income tax by 1 percent while neighboring school districts reject the referendums, wage earners will move to a school district with a lower wage tax, he predicted.
Mr. Fischer said that's what happened when Pittsburgh had a 4 percent wage tax into the 1990s.
"There was a mass exodus to the suburbs," he said.
On the ballot
Most Beaver County school districts levy about 0.5 percent in wage tax now, and most are proposing to add between 0.5 percent and 0.7 percent.
Western Beaver is among the exceptions, though its numbers are somewhat deceiving. It now levies 1 percent in wage tax, but splits that with Glasgow, Industry and Ohioville. It keeps the standard 0.5 percent.
Western Beaver is atop the list, though, in proposing a full 1 percent bump in wage tax. Superintendent Enrico Antonini said he'd be surprised if voters approved that, especially when it is projected to yield an average savings of only $250 per property owner.
Mr. Antonini said that would be fine with him. He sees problems with a higher reliance on wage taxes.
"We have a high percentage of people who are delinquent in their wage taxes," he said, forcing the district to make additional efforts to collect.
The problem comes partly because few residents work within district boundaries, Mr. Antonini said, and many employers will not withhold taxes from employees from other school districts.
The opposite appears to hold in Rochester. There, according to Superintendent Dean Galitsis, the district calculated the minimum income tax increase it is allowed to request, which worked out to 0.38 percent, and asked for that.
As for voter reaction, he said, "My suspicion is very strong that it will be approved," which he would welcome. He said 1 mill in Rochester brings in about $70,000, giving the district little flexibility when it comes to boosting revenue, and the income tax would be another tool.
He said the school board and a tax commission, which studied the issue, concluded that the minimum raise "seemed to be the cheapest and fairest way to go."
In order to qualify for the reduced property taxes, property owners must have filed for an Act 50 Homestead/Farmstead Exclusion with their county assessment office.
The deadline for filing this year was March 1, said Kevin Evanto, Allegheny County communications director. So if you don't have a homestead exclusion on file, you won't get a property tax reduction this year even if your school district approves the tax shift.
Mr. Evanto said county taxpayers could check their property on the county's real estate Web site to determine if they have the exclusion. If not, they can download a form or call 412-350-4600 for more information. People living outside Allegheny County will have to call their respective county assessment offices for more information.
Nearly 90 percent of the school boards across the state decided to ask voters whether they want to increase the earned income tax.
About 11 percent suggested replacing the earned income tax with a personal income tax, according to a survey by the Pennsylvania School Boards Association, which got a 92 percent response rate from districts.
Weighing the options
The earned income tax is levied against earnings, salaries, commissions, bonuses and other forms of direct compensation.
The personal income tax includes all earned income plus interest, dividends, net gains or income from dispositions of property, net gains from rents, royalties, patents and copyrights, income derived through estates or trusts and gambling and lottery winnings.
Neither option taxes Social Security or pensions.
The PSBA has officially asked school boards to remain neutral on the Act 1 referendums, said Scott Shewell, PSBA spokesman.
"Individual board members are free to express their opinions, but we have recommended that they not take any action as a board," he said.
Nevertheless, the PSBA predicts 20 percent of the referendums will be approved. The average property tax savings statewide is $340 for those with increased earned income taxes, and $407 for those with personal income taxes.
Weighing the options was especially difficult in a district such as Woodland Hills, which is extremely diverse. The needs of senior citizens who believe they are being taxed out of their homes have to be weighed against the interests of other residents.
"If you have a high percentage of renters, they get no relief from the homestead exclusion, but their income taxes will go up," said Maria McCool, spokeswoman for Woodland Hills.
In the Carlynton School District, Superintendent Michael Panza said the school board decided to go with a personal income tax because 47 percent of the residents are renters.
"If we went to the earned income tax, we know that 47 percent of our people would pay the bulk because renters don't get a tax break," he said. "We wanted to see what we could do to spread it out."
Voters don't understand
Many officials believe real estate taxes are a more dependable source of revenue than earned income taxes.
Income taxes are much harder to collect because they are based on information provided by the taxpayers. While real estate taxes remain constant, income taxes will fluctuate. Layoffs, plant closings and retirements all can affect the numbers.
Despite all the work that has gone into the referendum questions, few voters are likely to understand what impact their vote will have, and many won't have any idea how important their vote will be.
"There is a total misunderstanding in the general population about this referendum," Ms. McCool said.
Jan Ackerman can be reached at firstname.lastname@example.org or 412-851-1512. Staff writer Brian David contributed to this story.