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Act 72: Burden of taxations shifts from real estate property by Tom Boyle [email protected] During the last gubernatorial election, the people of Pennsylvania said they wanted to have choices on taxes. Because of that, local school districts now are being asked to participate in the Homeowner Tax Relief Act, which is also known as Act 72. Taxpayers of the participating districts will see many changes as the burden of taxation shifts further away from real estate property. Act 72 was the topic of conversation Tuesday during a community information session at Haskell Memorial Auditorium on the campus of the University of Pittsburgh at Titusville. According to Dan Brockett of the Penn State Cooperative Extension, Venango County, many citizens dislike real property taxes because residents are asked to pay their bill in large lump sums and because of the complications with assessments, millage rates, etc. There also are problems with payment inequity and assessment inequity. Brockett noted during the session that 44 percent of tax dollars to districts in Pennsylvania currently come from property taxes. He said Harrisburg felt the voices of local people were not being heard and developed the Act 72 legislation, which has the following characteristics: n Gives real property tax breaks to homeowners and farmers (through Homestead and Farmstead Exclusions). n Is paid for by a local contribution (through taxes) and by state gaming revenues, also known as the Property Tax Relief Fund. n Mandates participating districts to ask for voter approval for future large tax increases. Of the third item, Brockett siad, �Landowners will love it and school administrators will hate it.� Also under Act 72, districts would now have the option of using the personal income tax rather than the earned income tax for a revenue source. When will districts receive money from the Property Tax Relief Fund? Brockett said the initial distribution is expected for either the 2006-07 or 2007-08 school year. Brockett said no money will be distributed until the fund reaches the $900 million level. He said from that point, $500 million of the money will be distributed and the other $400 million will be placed in a reserve account. Brockett said according to the state, proceeds from gaming eventually will generate $1 billion for tax relief. He said although the money is earmarked for tax relief, it is not written in law that it has to be used for that purpose. To qualify for gaming money, districts must increase the local income tax by 0.1 percent. Individuals who wish to apply for an exclusion must apply to the county tax assessment office by March 1. The local district has already sent out a reminder notice about the deadline. Brockett also discussed the back-end referendum aspect of Act 72, under which voter approval is required for any future real property tax increase if the tax rate exceeds the inflation index. Brockett said the inflation index is the average of the change in the statewide average weekly wage (SAWW) and the change in the employment cost index for elementary and secondary schools. The Department of Education calculates these rates by Aug. 15 for publication by Sept. 1 in the Pennsylvania bulletin. Brockett said the referendum is held in the spring. If the voters approve the referendum, a tax rate increase occurs. If the referendum is not approved, districts are still allowed to take the increase up to the inflation index. Brockett said in the case of exemptions to a back-end referendum, a public hearing on the exemptions must be held and any taxpayer has the right to file objections to the case. Commenting on Ohio�s back-end referendum, Donna Popieski, school board member, said the State of Ohio took over districts there that had declined due to taxpayers voting down increases for school projects. �They took the schools out of the local taxpayers hands,� Popieski said. Brockett also said participating districts will have a new budgeting cycle under Act 72. He said in January, districts must display their preliminary budgets in 110 days prior to the spring election. In February, districts must adopt a preliminary budget at least 90 days prior to the spring election. In March, the state notifies districts as to whether or not the proposed increase exceeds the inflation index and in May the spring primary and back-end referendum are held. �School districts generally do not have their numbers this early in the year,� Brockett said of the January deadline. �There will be more guessing in the budget than there used to be.� Add a comment |
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