Tax-Shift Referendums

Posted: May 06, 2007

What is the May 15 vote on taxes?

Act 1 requires that Pennsylvania voters except in Philadelphia, Pittsburgh and Scranton decide whether to cut their property taxes by increasing their income taxes.

What types of taxes are on the ballot?

Each school district is asking voters whether they want an increase in their earned-income tax (a tax on income that appears on a W-2 form or Schedule C) or a new personal-income tax (earned income plus interest and dividend income). This would be in addition to any existing earned-income tax. Social Security and pension income would not be taxed. In the Philadelphia suburbs, 49 of 63 school districts put an earned-income tax on the ballot; 14 are asking whether voters want a personal-income tax.

What happens if voters say no?

If voters reject the measure, property and income taxes stay the same. In 2009 and in other odd-year primaries, school boards could ask voters to decide again whether to shift to more income taxes, but those referendums are not required.

What income-tax increase are districts proposing?

In the Philadelphia suburbs, 36 of 63 school districts are asking whether voters want a 1 percent increase. The rest range from 0.5% to 1.6 percent.

What happens to the money raised through the new tax?

Within each school district, the dollar amount of property-tax relief given to each qualifying homeowner would be the same. Homeowners have to apply to get the tax relief; anyone who filled out one for the previous tax-relief initiative, Act 72, would not have to apply again.

Who wins, and who loses?

Homeowners with little or no taxable income benefit. Renters with taxable income would pay more. Residents who work in Philadelphia would not have to pay the new tax; when gambling revenue starts flowing, that revenue would be used to pay districts an equivalent amount. High-income homeowners would pay more if their income-tax increase exceeds their property-tax savings.

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