The Herald, Sharon, PA Published Thursday, April 18, 2002

Planners see income tax as alternative to property levy

By Robert B. Swift
Ottaway News Service

HARRISBURG -- Pennsylvanians with incomes above $90,000 could wind up paying more in taxes to support education under a proposal to cut school property taxes by 50 percent, a key sponsor said Tuesday. Those earning less than $90,000 would pay less.

Rep. David Steil, R-Bucks, says high-income taxpayers should take a long-term view regarding proposals to shift toward income taxes and away from property taxes as the main revenue source for public schools.

He said this group may pay more in taxes when they are in the upper income brackets, but they wouldn't face the same burden if their income dropped due to circumstances beyond their control.

"You could lose a job, be injured, get ill or retire," he added.

Steil spoke at a joint meeting of a special House committee studying the funding of public education and the House Local Tax Policy caucus which he co-chairs. The caucus unveiled a proposal last month to reduce reliance on school property taxes.

The local tax caucus proposes that the state assume control and funding for special education as a way to lessen costs for the 501 school districts by a total $1.5 billion annually.

The caucus proposes that schools levy a local personal income tax to pay for the 75 percent of school instructional costs associated with salaries and benefits, textbooks and other classroom materials.

This personal income tax would be based on wages, stock dividends and investments, but not include pensions or Social Security. The remaining 25 percent of costs associated with fixed-cost items like building maintenance, utilities would be funded through a much smaller property tax.

Lawmakers have repeatedly said there are winners and losers under any tax reform plan.

Under a rough theoretical comparison, an individual earning $70,000, living in a home valued at $100,000 and paying $2,000 in property taxes would see property taxes drop by $1,000, said Steil. They would pay $1,050 on a 1.5 percent local income tax.

An individual earning $200,000 and living in a $100,000 home would see property taxes drop by $1,000, but end up paying $3,000 in local income taxes.

The 2.8 percent state personal income tax would have to increased to cover the special education costs and providing protection for low-income property owners under the proposal, added Steil.

The caucus has left recommendations for dealing with the related issue of equal education opportunity for students in rich and poor school districts to the special committee.

But Rep. Nicholas Micozzie, R-Delaware, said the equity issue must be addressed as part of any tax shift plan.



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