Tax question up to local voters

A smoky fire Sunday afternoon at a Sizerville Road home owned by Mike Smith posed challenges for responders from the Emporium Volunteer Fire Dept. Equipped with air tanks, firefighters were able to enter the two-story structure and extinguish the blaze, which apparently started at an electrical outlet in the basement. Volunteers saved the home, but it sustained heavy smoke damage. There were no injuries.

One by one, school districts in Potter and Cameron counties are preparing to ask voters if they are willing to pay higher earned income taxes, in return for reduced real estate taxes on their homes.

Some pundits have referred to the Act 1 changes in Pennsylvania’s school tax structure as “a case of robbing Peter to pay Paul.”

Tim Frenz, managing director of consulting firm Parker/ Hunter, says that beyond the confusion and complexities of Act 1 is a real opportunity for homeowners to pay lower real estate taxes -- but not without a price. Parker/Hunter is working with about 40 Pennsylvania districts on their Act 1 recommendations.

“This act is poorly written and hard to understand,” said Frenz. “There will be some winners and some losers.”

Act 1 calls for school districts to lower real estate tax rates by either increasing the earned income tax (EIT) rate or creating a personal income tax (PIT) to replace the current EIT.

The EIT tax considers wages, salaries, commissions and income such as tips. These are roughly the same wages that appear on a Form W-2. The PIT includes all of those plus interest, dividends and other net income. Neither includes pension or Social Security income.

Across the state, residents will vote on either the EIT or PIT — whichever option their school board decides to present — on the 2007 primary election ballot.

Each school district was required to appoint a Local Tax Study Commission to investigate and recommend which option to put on the ballot. The school board is not required to follow that recommendation.

Any homeowner who has applied for the homestead exemption through the district will see a decrease in property tax.

Once the decision to go with a specific tax is settled, the district does not have to revisit the idea ever, but can do so in odd years. School boards have until March to hash out the details of the referendum question.

Cameron County Area School Board last week passed a resolution accepting the Local Tax Study Commission’s recommendation that voters be asked to approve adding .5 percent to the district’s earned income tax.

Austin Area School Board also accepted its study commission’s recommendation to add .617% percent to that district’s EIT.

Gaming revenues are still a part of Act 1, as well. Each district could eventually see income through that avenue when revenues are distributed from the state. When that happens, the district is able to lower the percentage of EIT or PIT.