Would you vote for a new school income tax if you could save $500 in property taxes?
What if you could save more than $1,000?
Would the tax be a good idea if 20 percent of the residents in your school district would save money? What if that percentage was 60 percent?
On May 15, primary voters across Pennsylvania will decide whether to cut school property taxes by raising income taxes an equal amount. The referendums are required by Act 1, the property-tax-relief law passed last year, and apply to all localities except Philadelphia, Scranton and Pittsburgh. The law is designed to shift the tax burden from fixed-income homeowners, mostly senior citizens, to higher-income wage earners.
Observers say voters are poised to vote no largely because there's no organized support and it's difficult to get voters to approve a new tax. Critics say some school boards are undermining the yes vote by lowballing how much voters could save.
Boards in those districts "are totally misleading people," said State Rep. David Steil (R., Bucks), a coauthor of Act 1.
"If you want the Act 1 tax shift to be defeated, this is the way to do it, and it would really hurt taxpayers who could benefit from the property-tax savings."
Of the 63 districts in the suburbs around Philadelphia, 26 - 41 percent - are listing on the ballot substantially lower estimates of property-tax savings than their calculated possible total savings, an Inquirer review of documents shows.
Some districts are basing their estimate only on the first year's collection, which officials say will be lower than in future years. Some districts also say they will be able to collect the tax from only 60 percent to 70 percent of residents in the first few years, and that is why lower savings are on the ballot.
Tax-collection professionals say that once the tax is in place, income-tax collection rates will be high. Jim Hunt, director of sales and client services for Berkheimer Tax Administrator, which collects taxes for 132 Pennsylvania school districts, said the average earned-income tax collection rate was 95 percent.
Radnor, in Delaware County, is among the districts with the largest gap between proposed and potential savings. The ballot question says voters could save up to $480 in property taxes. If a 100 percent collection rate is assumed, that figure would be $1,233, district projections show. The average residential tax bill in the wealthy district is $4,991.
The district opted for the lower amount because it's a new tax and "people would not be familiar with the collection mechanism," business manager Lisa Palmer said. And the new tax wouldn't go into effect until July 1, a partial year.
The underreporting of savings is troubling for the Rendell administration, which is pushing the Act 1 referendums as a start at property-tax relief.
"Districts should have told the voters the full value of the savings for a 12-month period," said Donna Cooper, a senior policy adviser to Gov. Rendell. "This raises a lot of red flags."
In Bucks County's Pennsbury district, the ballot question lists a savings of $364. If a 100 percent collection rate is assumed, that amount would be $728.
How much districts say residents will save will likely influence how people vote, Steil said.
In the Pennsbury district, he said, if the real property-tax savings is $364, only about 20 percent of voters would benefit from the tax shift. If it is $728, about 60 percent would do better, he said, and "if they understood this, there would be a much better chance of its passing."
When asked how Pennsbury had come up with the savings it put on the ballot, business manager Isabel Miller said the district had followed its lawyer's advice.
"We certainly weren't doing it to mislead anyone," she said. "There was no direction one way or another in the act."
Radnor School Board President Kathy Fisher said the board was trying to follow the law. "Nowhere did anyone say, 'Let's figure out how we can make this look bad.' "
Act 1 has been a tough sell with school boards. The legislation includes provisions for distributing gambling revenue to school districts to reduce property taxes once the state collects enough from casinos. But it also requires voter approval of budgets when they require a tax hike exceeding an annual inflation index, with some exceptions. Those provisions remain in force even if voters reject the new income tax May 15.
While polls show voters dislike high property taxes, they don't necessarily like the tax shift.
Clay F. Richards, assistant director of the Quinnipiac University Polling Institute, which sampled public opinion this year on the tax shift, said voters were skeptical that they would save money.
The shift to a new tax also has its supporters. "The property tax is fundamentally flawed, and we need to move toward an income-based tax," said Stanley Johnson, school board president in Springfield, Delaware County. "The property tax is not at all indicative of an individual's ability to pay. An income tax is."
Ed Hardison, a retired sales manager and Democratic Party activist from Middletown Township, said he, too, wanted a move away from property taxes.
"We must find another way to fund school taxes," he said. "Property taxes are out of hand. They're hurting people of retirement age - the medium-income group. This is a step forward."
Generally, there has been little public campaigning and not much debate on either side. In a February Quinnipiac poll, 65 percent of voters said they had heard or read either "only a little" or "nothing at all" about the issue.
An exception is in Tredyffrin/Easttown, where the school board took the unusual step of sending a mailing to all voters urging a no vote, and the local Republican Party ordered hundreds of yard signs urging residents to vote the tax down.
"We've done very well with the property tax," said John C.T. Alexander, chairman of the Tredyffrin Republican Committee, who has a sign on his front lawn. The cost of collecting a new income tax would be "ridiculous," he said. "And it will cost the renters. We have a lot of them, and it will cost them a lot."
Steil, the Bucks county legislator, said the district mailing violated Act 1, which he said barred the use of public funding to campaign on either side.
Tredyffrin/Easttown Board President Kevin Mahoney disagreed. "We have been asked multiple times what the school district's position was, and that is the board's position," he said.
If the tax proposals are defeated, many residents and school board members say, it should be a signal for the legislature to find another way to reduce property taxes.
Seven Philadelphia-area school boards, most at the urging of taxpayer organizations, have passed resolutions for the repeal of Act 1 and the passage of a new law that would cut property taxes and fund schools equally.
Joe Gable, a retired banker from Warwick Township who heads the Central Bucks Taxpayers Association, said he hoped no-votes would send that message.
"We want them to go back to work and establish a real property-tax relief bill," he said. "We would like them to eliminate the property tax and substitute a statewide tax."
Steil said he understood taxpayers' frustration but added that property-tax relief had been on the legislative agenda for decades, and that "Act 1 was the only thing we could get [a majority in the state House] to agree on. If the taxpayer groups believe that there will be a miracle, one-size-fits-all solution, they're kidding themselves."
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.
More information on the Act 1 referendum in your county is in today's Neighbors section.
To read the specific question on the ballot in your municipality, go to http://go.philly.com/act1 EndText