Monday, March 05, 2007

Pennsylvania Taxpayer Relief Act 1

PA Act 1 part one post can be found here Pennsylvania Taxpayer Relief Act 1 (part one)
Pennsylvania Taxpayer Relief Act 1 : Part 2

Many Pennsylvania school districts have opted to add the referendum on the May 15, 2007 primary election ballot for voter approval to accept .5% increase in Local Income Tax. This .5% increase in your local taxes is supposed to provide real estate tax relief. For many taxpayers this will just not be the case.

This article will use the Curwensville Area School District (CASD), Curwensville, PA. At the February 2007 meeting, the CASD voted in favor of approving the Act 1 referendum question.
The question on the ballot is to read "Do you favor imposing an additional .5 percent earned income tax?"

One Question we have is, Why a .5% increase in local taxes when the Property Tax Reduction chart dated 1/6/2006 by the PA Department of Education shows that only a .3% increase is needed in the CASD local income tax to offset the reduction in property taxes??


This is a tax scam and not really a tax reduction. According to CASD this .5% local tax increase is supposed to lower the average real estate property tax by $159.00 dollars. This reduction is also assuming the property owner has a current Homestead Exemption onfile. Yes, the numbers do show that the property tax payed by taxpayers will be reduced. What you are not being shown is the increase in your local taxes and the fact that you will more than likely end up paying more in overall taxes than you do currently.

According to http://www.city-data.com/city/Curwensville-Pennsylvania.html the average Curwensville, PA resident's income in 2000 was $27,281. More recent figures would likely show an increase in average income. For the purposes of this demonstration we will use the figure of $27,281.

$27,281 times .5% local tax will yield $136.00 additional paid for local taxes. Taking the average reduction in property taxes paid of $159.00, this person will see an overall decrease in total taxes paid by $23.00. At least this resident did see a property tax reduction.

Now, lets consider that most households have 2 income earners in the household. Both pay property taxes on one house. Yet, both will pay income tax separately. This couple will have their property taxes reduced by the average $159.00. Now with each one paying an additional $136.00 for a total of $272.00 in local taxes you can easily see they have ended up paying more in taxes under this system versus the way it is now. Showing the math, $272.00 minus $159.00 equals $113.00 dollars more paid in taxes.

These numbers represent the average property owner with the average property tax reduction with the average income. The local income tax rate is figured using the Earned Income Tax(EIT) - basically the current method where just your wages are taxes. If these figures were calculated using the Personal Income Tax(PIT) method that many localities are being suggested to change to, the additional .5% local tax increase will most likely be much higher. The PIT method of collecting local income tax taxes things such as interest, dividends, etc. that are not taxed currently using the EIT method. So if a change to a PIT local tax is also implemented you will pay much more in local taxes.

Yes, those few below the average line will see decreases as they always do. It is the majority above the average line that will see an increase. This is not property tax relief, this is nothing more than a tax scam. At the bottom of this post we will have an address for Operation Tax Scam that you can get more information and send a complaint.


Voting yes to increase the local income tax by .5% clearly shows that this is not a wise decision for the taxpayer to make. Vote NO to the .5% local earned income tax increase on May 15,2007.


If you're opposed to Act 1, please write to:

Operation Tax Scam
The Mercury
24 N. Hanover St.
Pottstown, PA 19464.


For more information on Act 1 opposition read http://www.keystonepolitics.com/node/5462

A future post will cover the part of Act 1 pertaining to the school districts cannot raise taxes without voter approval wording that is being used as another selling point of Act 1.

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