Earned income tax hike on most primary ballots
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School boards across the state have approved a wide variety of proposed tax rates for voters to consider in the May 15 primary.
Nearly 90 percent are asking voters whether they want to increase the earned income tax, with proposed increases ranging from 0.07 percent to 1.9 percent and making the range of tax rate totals 0.6 percent to 2.95 percent. The average increase is 0.58 percent.
About 11 percent have suggested replacing the earned income tax with a personal income tax ranging from 0.40 percent to 2.45 percent. The average increase is 0.86 percent.
Those are among the survey results released yesterday by the Pennsylvania School Boards Association. The survey covers 461 school districts or about 90 percent of the 498 required by law to have tax referenda on the primary ballot. Pittsburgh, Philadelphia and Scranton are not required to do so.
In the survey, 409 school boards said they adopted a ballot question on raising the earned income tax, 52 have a question on the personal income tax and 37 didn't respond.
A new state law -- known as Special Session Act 1 of 2006 -- requires a school board to adopt a referendum increasing either the earned income tax or the personal income tax, which taxes earned income as well as interest, dividends and other income.
The income tax increases are to be used to reduce property taxes.
Before a board could adopt a referendum question, a local tax study commission made recommendations. More than 90 percent of school boards followed the commissions' recommendations, according to the PSBA.
Each board was required to pass a referendum, but it will be up to voters to decide whether any changes can take place.
The Allegheny Valley School District referendum suggests the highest personal income tax rate in the state, 2.95 percent.
"The idea is to have it voted down," said Superintendent Gabe Ziccarelli. "Basically, the tax study commission in our district felt that either way -- whether it was a personal income tax or the earned income tax -- it would have a negative impact on the majority of taxpayers."
David Davare, PSBA director of research services, said his best guess is that perhaps 20 percent of the referenda will be approved. He's figuring that's about the number that opted into a previous property tax act known as Act 72 that also would have required referenda for certain tax increases.
David Baldinger, administrator of the Pennsylvania Taxpayers Cyber Coalition, made up of more than 20 taxpayer groups, said his group is hoping the ballot measures are defeated because they don't provide enough property tax relief.
In addition to differences in tax rates, there are wide differences in how much taxpayers can save in property taxes and the "break-even" points at which the extra income tax eats up any property tax savings.
The average property tax savings statewide is $340 for those with increased earned income taxes and $407 for those with personal income taxes. The savings apply to those who live in homes they own and have homestead exclusions or those with farmstead exclusions.
In Allegheny County, the savings range from $115 in Duquesne to $1,014 in Upper St. Clair, both by raising their earned income taxes.
For some taxpayers, the property tax savings will be offset by additional income taxes paid. On average statewide, PSBA calculated that taxpayers who earn more than $48,593 a year would pay more with a higher earned income tax as would those with incomes above $51,119 with a personal income tax.
The referendum question that will be on the primary ballot next month is called a "front-end" referendum.
Act 1 also includes a "back-end" referendum which requires school districts to get voter approval for property tax increases above an index set by the state. The index for 2007-08 ranges from 3.4 percent to 5.5 percent, depending on the district.
Last week, the state Department of Education announced that 210 school districts -- or 42 percent -- had been granted exceptions permitted under the law, most commonly for pension obligations, special education costs and school construction costs.
It won't be known until final budgets are approved how many districts will actually use them.
The PSBA noted that a handful of school districts could have two referenda -- front-end and back-end -- on the May ballot.
One of them is Ambridge Area in Beaver County, which decided to take its request for a property tax increase directly to the voters.
The law permits Ambridge Area to raise its 56-mill property tax by 2.52 mills. The referendum asks voters for 0.98 mills beyond that, for a total increase of 3.5 mills.
"If the taxpayers want the millage increase above the index, then that would be a decision of the taxpayers. That was primarily the reason that the board wanted to put it in the hands of the taxpayers," said Ambridge Area Superintendent Kenneth Voss.
The PSBA study is available at www.psba.org.
First Published April 10, 2007 10:06 pm
