The only thing simple about the Taxpayer Relief Act of 2006 is its name. And even that can be deceiving.
So here's a primer on Pennsylvania's latest attempt to cut school taxes. If you live in the Philadelphia suburbs, listen up, because you'll be voting on the issue come Tuesday.
Under Act 1, as it's commonly known, an estimated $1 billion in annual slot-machine revenue will fund property-tax relief in all school districts except Philadelphia's, which will receive a wage-tax reduction. That revenue, however, won't be available until next summer, unless the Legislature approves an increase in the state sales tax, as Gov. Ed Rendell has proposed.
In the meantime, residents who live outside the city will vote in next week's primary on whether to increase their local income tax to lower their property tax.
It would be a dollar-for-dollar shift districtwide; schools won't see an increase or decrease in total revenue as a result of the vote. But the ballot question could have a significant impact on individual tax bills.
Renters will lose big-time if the question is approved in their district. They'd have to pay the new income tax - ranging from 0.7 percent to 1.5 percent in Delaware County - and wouldn't receive any property-tax reductions because they don't own property. Landlords also may opt to pass the cost of the new income tax onto their tenants.
Suburban homeowners who work in Philadelphia are likely to favor the Act 1 tax shift. They would reap the benefits of lower property taxes, but are largely exempt from new income taxes because they already pay the city wage tax.
"Everybody else is somewhere in between," said Lynn Glancy, executive director of operations for the school district of Springfield, Delaware County. "Either they're going to save a little bit in total taxes or it will cost them more."
Generally, low-wage earners and seniors on fixed incomes would benefit by approving the Act 1 question. Households with a lot of earned income would end up paying more.
Upper Darby School District officials estimate that a new 1-percent earned-income tax would fund a $290-per-household property-tax reduction for the upcoming fiscal year. Based on that estimate, households earning more than $29,000 would see their overall tax bill increase if the question were approved.
"It's a very complex situation," said Louis DeVlieger, an assistant superintendent in Upper Darby. "How it's going to shake out, we have no idea."
Some districts have conservatively estimated the income-tax collection rate for the first year, so homeowners in districts that approve the tax shift may ultimately see larger property-tax savings than what is stated on the ballot.
"It's a real can of worms right now," DeVlieger said, adding that Act 1 may pit the district's wealthier and poorer residents against each other.
Once the state's slot parlors fill a designated fund with at least $570 million, gaming revenue will be used to further reduce property taxes and make modest cuts to Philadelphia's wage tax – regardless of how districts vote on Tuesday's Act 1 question.