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Tyrone Area Tax Study Commission to make recommendation to school board

The Tyrone Area Tax Study Commission will present its recommendation on a tax referendum question to the Tyrone Area School Board on Monday evening.
The Commission held a public meeting on Wednesday evening. In addition to the commission members, school administrators and the media, there were only a couple of people from the general public in attendance.
The nine-member commission was appointed in September by the Tyrone Area School Board and held an initial meeting in early October. It is part of the mandated implementation of Act 1 tax law enacted in Pennsylvania. The appointment of the commission and its work are part of the development of a referendum question to allow voters to decide if they want to further reduce property taxes by switching a portion of the local property tax to a local income tax.
Property taxes are already earmarked to be reduced for homeowners in the state through money expected to be generated by slot machine gambling. Voters in each district will have to choose to accept or decline revenues from gambling for property tax relief. School officials indicated the soonest it might see money from slots is 2009.
The commission had to choose from one of six options it was presented with as part of Act 1. Three of the options are for an increase in the earned income tax. The other three options are for a personal income tax to replace the earned income tax. The EIT options list three levels of increase in the earned income tax. The level of increase were listed at .30, .40 and .50 percent. The current EIT is .65 percent. The personal income tax options also list three levels of taxation The options are .90, 1.0 and 1.1 percent.
At its Nov. 4 meeting, commission member Bill Hoover recommended the EIT minimum option be presented at Wednesday’s public meeting. His motion was seconded and passed by the commission.
The referendum question would read as follows under that option: “Do you favor imposing an additional .30 percent income earned income tax. The revenue generated for the increased tax rate will be used to reduce taxes on qualified residential properties by $138. The current earned income tax rate is .65 percent.”
The commission voted unanimously to recommend the referendum question as stated above at Monday’s school board meeting. However, the commission let it be known that although it was required to choose one of the six options and the school board is required to put forth a referendum question from those options, the commission does not favor passage of the referendum question when it is put before the voters next spring.
The commission’s recommendation is nonbinding and the school board is free to choose one of the other six options. School administrators have indicated the board is expected to accept the commission’s recommendation.
In addition to making the recommendation on the referendum question, the commission approved the wording of a statement that will be presented to the school board on Monday.
The statement concludes with the following wording: “Because we believe tax shifting, through the Homestead/ Farmstead exclusion, by imposing an EIT increase will not improve the tax policies of the Tyrone Area School District, we recommend voters vote “NO” on the referendum question.”
By Feb. 26 of next year, districts have to begin advertising its intent to adopt a resolution regarding allowing voters the option of approving further property tax relief through a referendum. Schools are required to adopt a resolution authorizing a referendum question by March 13.
Regardless of whether an EIT or PIT option is put forth in a referendum question in a given district, the additional amount of property tax relief will be between half of the maximum homestead exclusion (the formula in place for slots-based property tax relief) and the full maximum exclusion allowed, but it does not have to be more than a one percent EIT increase.
The state’s tax relief web site noted “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.”
The additional relief could take effect as early as July of next year.
If voters reject an EIT increase or a conversion to a PIT then there would be no additional property tax relief at that point. However, according to the state’s tax relief web site, school boards can also give voters (with the exception of Philadelphia) the choice of further reducing property taxes in the 2009 municipal election or any municipal election after that.