The state House and Senate's failure to agree, despite a three-month special session, on how best to reduce school property taxes highlights an important truism: Tax reform is in the eye of the beholder. That's why the two chambers have passed strikingly different proposals and why Gov. Ed Rendell, who is eager to move adroitly from the Year of the Pay Raise to the Year of Re-Election, has yet to broker a three-party deal.

What's been achieved so far is a mixed bag for Pennsylvania, and only careful refinement can make it worthy of law.

The Senate package, which closely follows the governor's Act 72 plan, would rely on slots casino revenue and a local school district's option to raise its wage tax to provide the dollars necessary to cut school property taxes. Under that formula, some school districts would realize only an 18 percent cut in the property tax; that's not enough.

Also, since Pittsburgh is one of three school districts that would be barred from raising its wage tax (because its rate is already high), home-owners there would not realize as much property tax savings as other Pennsylvanians. There must be another ingredient to increase property-tax reductions for everyone.

The House bill seems to provide that. It would use the same gambling revenue, plus an increase in the state personal income tax to 3.29 percent and the elimination of certain exemptions to the state sales tax as a way to achieve deeper property tax reductions. We oppose raising the income tax for this purpose from 3.07 percent, the level it moved to in 2004 after being at 2.8 percent.

We don't mind reducing school property taxes, however, by extending the sales tax to things like candy, gum, dry cleaning, personal hygiene products, entertainment and commercial sports admissions and other items that are now exempt. This would raise an estimated $2.3 billion and be preferable to another option: raising the sales tax rate by half a percentage point to 6.5 percent.

The "backdoor referendum" that originated in the governor's plan, appears on its way to inclusion in any version of this legislation. It would give local residents the chance to vote on any school budget that exceeds the rate of inflation. That's unfortunate because voters already elect school board members to make such decisions, and no other officeholders we're aware of -- county, state or federal -- are eager to hand over their budget-making authority to the minority of constituents who show up at the polls.

Although it's understandable that a state bent on lowering property taxes would need to restrain the growth of school budgets, this method is flawed and could pose a threat to some public schools.

Though the situation is far from perfect, Gov. Rendell and the Legislature have the makings of a plan that could cut property taxes without posing an undue burden on less fortunate Pennsylvanians through onerous forms of tax-shifting. All that remains is making the correct choices for where to get the revenue and resisting interference from lobbyists.