Option to Further Cut Property Taxes

Communities will be able to reduce their property taxes as early as July 2007 by shifting a portion of local property taxes to a local income tax. This option gives voters the ability to choose the best mix of local taxes to meet their needs.

Voters in every school district will go to the polls at the 2007 primary election. Voters will be asked whether they want to raise either an Earned Income Tax (EIT) or a Personal Income Tax (PIT) and use that revenue to immediately cut property taxes. The amount of property tax relief will be between half of the maximum homestead exclusion allowed by law and the full maximum exclusion allowed, but does not have to be more than a 1 percent EIT increase. This provision does not apply to Pittsburgh, Philadelphia and Scranton because their wage tax rates are already so high, increasing them even more will further deteriorate the economies of those communities.

School boards can also give voters the choice of further reducing property taxes in the 2009 municipal election or any municipal election thereafter. Voters in every school district outside Philadelphia will have the choice to cut property taxes by further shifting to an EIT or PIT, up to the maximum homestead exclusion allowed by law.

Voters have the choice of approving or rejecting any local tax shift. The voters’ decision will not limit their ability to receive state-funded property tax relief from gaming.

Before giving voters the choice to shift to an income tax to replace a portion of property taxes, a school board must form a Local Tax Study Commission made up of five, seven or nine members of the public. The commission is responsible for studying a district’s current taxing structure and making a recommendation on the impact of levying an EIT or PIT to provide property tax relief to the school board within 90 days. The commission’s recommendation is not binding.