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Main Line District: Complex tax-shift referendums coming to a vote

A letter railing about the Act 1 ballot question arrived in Radnor Township's Fifth Ward mailboxes on April 27.

A letter railing about the Act 1 ballot question arrived in Radnor Township's Fifth Ward mailboxes on April 27.

"It is important that you VOTE NO on the proposed personal income tax," wrote John Nagle, Democratic candidate for commissioner in parts of Bryn Mawr, Broomall and Newtown Square.

His opponent, Republican incumbent Lisa Paolino, couldn't disagree. "I don't think it's the right vehicle to help the schools," she said.

The Rendell administration's promise to reform the way school districts are funded - by shifting some of the burden from property taxes to a local income tax - goes before voters in a referendum nine days from now.

It's not expected to pass, and that's just the feeling among those who can figure it out.

"I don't know anybody who knows enough about it to make an intelligent decision," said Carla J. Zambelli, vice president of the Save Ardmore Coalition, a civic group that weighs in on local issues.

Unless voters can quickly master the complex topic, the ballot question is doomed, said State Rep. Greg Vitali, whose district spans Haverford Township and parts of Radnor and Marple.

"My sense is, there's a low level of understanding about it," Vitali said. "When people get to the polls and see the word tax in it, they're likely to vote no."

Almost all of the state's school districts were mandated by Act 1 to form a tax study commission. The panels met, held public hearings last winter, and chose an alternate tax vehicle and a tax rate. Refusing to decide wasn't an option.

Upper Merion, Radnor and Tredyffrin/Easttown picked the personal-income tax, a levy on wages, interest, dividends, capital gains, rental income, and gambling winnings. Upper Merion and Tredyffrin/Easttown set the tax rate at 0.6 percent, Radnor at 0.7 percent.

Haverford, Marple Newtown and Lower Merion selected the earned-income tax, which covers wages only. Haverford and Lower Merion set the rate at 1 percent, Marple at 0.8 percent.

This means that a family earning $40,000 in the Haverford School District would pay $400 in earned-income tax and have its property tax reduced by $483 for a net gain of $83. It makes sense for that family to vote for the tax-reform measure.

But a family earning $80,000 would pay $800 in earned-income tax for a property-tax refund of $483, leaving a net loss of $317. For that family, tax reform makes no sense.

Janice Pearce, a four-year school board member in the Norristown Area School District, said each household must do the math, taking into account its own finances.

"Every person in the household working will be taxed," she said. "You're going to have to look at how much you're going to pay."

One positive aspect of the tax measure, Pearce said, was that for the first time, renters would share in supporting the schools.

"Before, renters never directly paid a school tax," she said. "But the problem I see is: How do you find them?"

Another impediment facing school districts, Pearce said, is the cost and bureaucracy needed to collect the income tax.

"We've been told it will be 1 percent going to the companies that collect. How do you know how much you're going to collect? In Norristown, we need every dollar we can get," Pearce said.

State Sen. Connie Williams, who represents Haverford and Radnor Townships and part of Montgomery County, defended Act 1 as a way to get away from taxing real estate as the sole basis for funding schools. She said property taxes were unfair to older taxpayers, who have no kids in school.

"It's an antiquated system," Williams said. "It forces the elderly out of their homes, so we have to figure out a better way to do it."

Even if the measure fails at the polls May 15, it likely will be put to another vote two years from now, Williams said.

"This is just the beginning," she said.