posted by Mike Madison at 7:39 PM /
The point of the post title is to get your attention.
There is a primary election scheduled for Tuesday, May 15. Several School Board and Commissioner seats are being contested. The most important question on the ballot, however, doesn't have to do with your elected representatives. It doesn't have to do with the TIF, or with deer. It has to do with your taxes, and specifically with the thing known as "Act 1."
"Act 1" is shorthand for the Special Session Act 1 of 2006, the Taxpayer Relief Act, which was passed by the state legislature and signed by the Governor on June 27, 2006. The purpose of the Act is to provide property owners with property tax relief -- by shifting some of their property tax burden onto those who pay Earned Income Tax.
Act 1 is implemented voluntarily, via referendum, on a school district-by-school district basis. Mt. Lebanon will vote on Act 1 on May 15. Vote "yes" if you want to approve Act 1; vote "no" otherwise.
The basic proposition behind Act 1 is that overall funding for schools will remain the same. The source of that funding, however, is supposed to shift: Real estate taxes go down; local income taxes go up.
As a matter of general purpose tax policy, Act 1 has a lot to recommend it. Inequities in public education funding between wealthy towns such as Mt. Lebanon and poor towns such as (take your pick; there are lots of candidates nearby) can be pretty striking. Reducing school districts' reliance on real estate taxes as a principal source of funds is designed to reduce those inequities over the long run. For example, this was the theory behind California's property tax reform in 1978.
Mt. Lebanon voters, however, may want to skip the lesson on theory. Most people want to know how this will affect them personally. And how Act 1 would affect you, the individual taxpayer, depends on a number of things. First, it depends on whether you pay real estate taxes at all. If you're a renter, property tax relief via Act 1 doesn't do you much good. Second, it depends on whether you have much earned income. If you don't (i.e., if you live on passive or government income), then Act 1 is great. Third, as I understand it, when you trade off the average amount of real estate tax reduction involved against the increase in Earned Income Tax, your overall tax bill will go down if your household income is below a certain threshold, or it may go up, if your household income is above that threshold. And that threshold is, apparently, somewhere just north of $100,000.
Finally, the tax tradeoff that Act 1 represents may be only a one-time thing. Even if you vote "yes" and Act 1 passes, your real estate tax reduction may be only temporary. Mt. Lebanon is not among the districts that committed to capping increases in its real estate tax rate, which Act 1 encouraged. Real estate taxes may go down this year -- but they may head upward again, a year from now.
The Mt. Lebanon School Board recently passed a resolution opposing Act 1.
A report from a Mt. Lebanon School District Local Tax Study Commission has some helpful detail.
The Post-Gazette ran this feature on the mechanics of the legislation and what it might mean for certain school districts.
I haven't had time to collect a lot of information about this. If you have corrections to what I've written or more specifics, particularly as to how Act 1 would impact Mt. Lebanon, please post it in the Comments, or email me for posting in the blog. Thanks.
UPDATED 7:50 p.m. 5/03/07:
From the School District:
For additional information on Act 1 and its impact on the District, including the investment income shortfall the District will experience with its passage:
http://www.mtlsd.org/district/stuff/07-08budgetreport.pdf
Additional information on Act 1’s impact on renters and homeowners in Mt. Lebanon:
http://www.mtlsd.org/district/stuff/act1%20mt%20%20lebanon%20sd%2010-27.pdf
There is a primary election scheduled for Tuesday, May 15. Several School Board and Commissioner seats are being contested. The most important question on the ballot, however, doesn't have to do with your elected representatives. It doesn't have to do with the TIF, or with deer. It has to do with your taxes, and specifically with the thing known as "Act 1."
"Act 1" is shorthand for the Special Session Act 1 of 2006, the Taxpayer Relief Act, which was passed by the state legislature and signed by the Governor on June 27, 2006. The purpose of the Act is to provide property owners with property tax relief -- by shifting some of their property tax burden onto those who pay Earned Income Tax.
Act 1 is implemented voluntarily, via referendum, on a school district-by-school district basis. Mt. Lebanon will vote on Act 1 on May 15. Vote "yes" if you want to approve Act 1; vote "no" otherwise.
The basic proposition behind Act 1 is that overall funding for schools will remain the same. The source of that funding, however, is supposed to shift: Real estate taxes go down; local income taxes go up.
As a matter of general purpose tax policy, Act 1 has a lot to recommend it. Inequities in public education funding between wealthy towns such as Mt. Lebanon and poor towns such as (take your pick; there are lots of candidates nearby) can be pretty striking. Reducing school districts' reliance on real estate taxes as a principal source of funds is designed to reduce those inequities over the long run. For example, this was the theory behind California's property tax reform in 1978.
Mt. Lebanon voters, however, may want to skip the lesson on theory. Most people want to know how this will affect them personally. And how Act 1 would affect you, the individual taxpayer, depends on a number of things. First, it depends on whether you pay real estate taxes at all. If you're a renter, property tax relief via Act 1 doesn't do you much good. Second, it depends on whether you have much earned income. If you don't (i.e., if you live on passive or government income), then Act 1 is great. Third, as I understand it, when you trade off the average amount of real estate tax reduction involved against the increase in Earned Income Tax, your overall tax bill will go down if your household income is below a certain threshold, or it may go up, if your household income is above that threshold. And that threshold is, apparently, somewhere just north of $100,000.
Finally, the tax tradeoff that Act 1 represents may be only a one-time thing. Even if you vote "yes" and Act 1 passes, your real estate tax reduction may be only temporary. Mt. Lebanon is not among the districts that committed to capping increases in its real estate tax rate, which Act 1 encouraged. Real estate taxes may go down this year -- but they may head upward again, a year from now.
The Mt. Lebanon School Board recently passed a resolution opposing Act 1.
A report from a Mt. Lebanon School District Local Tax Study Commission has some helpful detail.
The Post-Gazette ran this feature on the mechanics of the legislation and what it might mean for certain school districts.
I haven't had time to collect a lot of information about this. If you have corrections to what I've written or more specifics, particularly as to how Act 1 would impact Mt. Lebanon, please post it in the Comments, or email me for posting in the blog. Thanks.
UPDATED 7:50 p.m. 5/03/07:
From the School District:
For additional information on Act 1 and its impact on the District, including the investment income shortfall the District will experience with its passage:
http://www.mtlsd.org/district/stuff/07-08budgetreport.pdf
Additional information on Act 1’s impact on renters and homeowners in Mt. Lebanon:
http://www.mtlsd.org/district/stuff/act1%20mt%20%20lebanon%20sd%2010-27.pdf
Labels: Act 1, school district, taxes
17 Comments:
The biggest issue with this bill is not just the fight between people who earn $100K or more vs $100K or less.
The biggest issue is competition between Upper St. Clair, Sewickly, etc. If Lebo votes for this, and those other places don't, suddenly the demand for high valued real estate will go down. People making big money may find out that they could save 50% in taxes by moving to a neighboring school district.
Also, people (like me) who make a real good income but purchased a modest home because I don't believe in working my whole life for a house, get hurt the most. People living in a $200K home paying $15K per year in taxes.....
Your post title is very appropriate. According to the May 2007 School District Budget report posted on their website, if Act 1 is passed, "the District will lose investment revenue and will likely raise millage by .13 mills. This millage increase will occur only if Act 1 is passed and only in order to offset lost revenue."
No one saves money under that scenario!
The breakeven point for the FIRST year is much much lower than $100k. It is at around $67,000 per household. Since the real estate tax credit given is equal for ALL homeowners regardless of the value of the home, and the credit is phased in over a two-year period, the first year will see a huge increase in the amount of taxes paid by working families. Especially those with dual incomes.
If a family of four makes about $100,000 a year then in the first year they will pay about $900 more in income tax (.9% increase in tax) and get a $640 property tax break for a total increase of taxes paid of $260. In the second year, when the entire real estate tax 'forgiveness' is in effect, that same family will pay the same $900 increase in income tax and will receive a total of $914 credit for a net decrease in tax of $14. Since, in theory, there is a finite amount less than $67,000 that can be earned, and an infinite amount above $67,000 that can be earned, this truly is a tax shift that, in my opinion, penalizes the middle and upper class families that live in the community. The previous poster made a good point, this really will be a competitive point to make when semi-wealthy people decide where they want to live. If the family makes $200,000 then their income tax goes up $1800 per year and they get the same $914 tax break for a net increase of $884.
Retired home owners appear to reap a tremendous benefit and renters take it on the chin.
The final point is that the school board has decided to reserve the right to increase your tax rate to make any ends meet. So there is no guarantee that this would be the final rate.
The link below is to a PDF presentation that has all the numbers in it. Start looking at around page 32.
http://www.mtlsd.org/district/stuff/act1%20mt%20%20lebanon%20sd%2010-27.pdf
Mt. Lebanon has already lost a ton of young wealthy residents because of the reassessment fiasco. The Mt. Lebanon Commissioners and School Board members pushed out families that were unwilling to pay twice as much in taxes than their neighbors because they bought a home here within the last 5 years. Many other suburbs did not fight to raise assessments to purchase price like Mt. Lebanon did. Mt. Lebanon is still fighting these new residents when they challenge their appeals. I am constantly hearing that Mt. Lebanon is just not worth it from young families.
Lebo will see the population continue to decline because of this - (the school population has steadily declined over the past 5 years.)
A vote in favor of a tax shift will continue to push out young families - especially those with $.
Hopefully the newly elected Commissioners and School Board members will try to re-establish communication. This has been a big problem over the past several years.
Hmm, I always think of renters as being single or couples without kids, and homeowners as being more likely to have families. I don't know if that's a fair assessment, but if it is, aren't you essentially moving a portion of the cost of schooling from the people most likely to use it? I know people who are the exceptions that prove the rule, but since tax law isn't set at a case by case basis, you kind of have to go with generalities.
I just moved to Mt. Lebanon, from Squirrel Hill. We considered other neighborhoods. Local income tax was a big factor. If this gets passed it will be like a bait and switch and be very disappointing. Other relatively wealthy young professionals like me deciding where to live will definitely consider local income tax as a big factor just like I did. If you want to keep those people away, vote in favor of the referendum. If you want to continue to attract young high income types, raising the income tax is the last thing you want to do, so vote NO.
Carol Walton made a point at the April meeting about the rich getting richer and the poor getting poorer while the middle class has been hollowed out.
Mt Lebanon has a cost to educate one student of $13,171 this year. A family sending 3 children to school gets over $39,500 in educational services. while the real estate taxes paid on a house at the median assessment of $150,000 are about $3,500 and the income taxes on a median income of $60,000 are $300. That family of with 3 kids is paying $3,800 in tax per year while the rest of the community provides the other $35,700 to educate those three children. Over a 12 year period the communuty pays $428,400 while the family pays $45,600.
If you are complaining about taxes why not talk to the school board about eliminating part of an overcrowded curriculum? Otherwise vote for the income tax increase to keep your schools
Fox Chapel mailed a budget newsletter telling their residents how much their tax decrease/increase would be under Act 1. Mt Lebanon hid their decrease/increase columns on page 35 of a 51 page report.
Be careful downloading the report from the school website if you have slow download because the report is 7 MB.
The report is somewhere on the website but not on page 1
In response to 5-3 @ 3:14pm...
We are all paying for the education of the children in our community who attend public schools. There are families who have lived here for over 25 years. At the time those families haad children in school there were couples and singles who owned homes who paid into their children's education. If you want to get rid of courses in an "overcrowded" curriculum, you may as well move because our schools will not be worth going to. Real estate values will plummet because few young families who value education will even look to move here when they can go to Peters, USC, North Allegheny or Quaker Valley.
I agree with Anonymouse of "May 05, 2007 7:32 PM."
Furthermore, it's naive to believe educating children well – including other peoples' children – is not worth your tax dollars. Educated young people in this community benefit all of us.
We pay taxes to receive public services and long-term return on investment. Paying well for education is just another example of a standard economic principle: invest long-term and diversify.
I agree with Anonymouse of "May 05, 2007 7:32 PM."
Furthermore, it's naive to believe educating children well – including other peoples' children – is not worth your tax dollars. Educated young people in this community benefit all of us.
We pay taxes to receive public services and long-term return on investment. Paying well for education is just another example of a standard economic principle: invest long-term and diversify.
I can't agree with Casey enough. The notion of public education is founded on principles of economic growth. It's shortsighted to insist that childless residents not bear some portion of the public education costs.
It's those kids that are going to be running the country, saving the world, and caring for your elderly bones 30 years from now. It benefits us all to equip them with an education that will provide the best opportunities for them.
Matt, your point is well taken.
You know what they say........
"Be kind to your children...they pick your nursing home!
Mount Lebanon will always be a prime place to live and most if not all the retiree's are great neighbors to have.
I think we should vote yes for the tiny increase to help fund such a thriving and dynamic community.
Whats the alternative,let it fall in to dissrepair like so many other communities? Inflation is real and it takes more money to maintain the township.
You may not like remarks about an “overcrowded curriculum” but we are supporting $474,000 to educate three children for 12 years ($13,171 x 12 x 3 = $474,000).
The $45,600 the parents pay is 9.6% of the total bill.
In addition the 7 county Pittsburgh metro area lost 58,585 people between 2000 and 2006. Pittsburgh is 2nd highest because of Katrina. Washington and Butler gained only 8,303 and 3,383.
Where did 46,899 people go? (58,585-8303-3383 = 46,899)
The Regional Asset District sales tax was a tax-shift to promote economic growth, then Tax Increment Financing, now a tunnel, and the new arena. Add on prevailing wage and teachers strikes and other issues raised at http://www.alleghenyinstitute.org/briefs/vol7no19.pdf and ask yourself is 9.6% what parents should expect to pay?
The PTA Council statement says they don’t want to pay.
If the PTA Council doesn’t want to pay who does?
It's not clear to me what the population loss statistic has to do with the point of the comment by Anonymouse 11:27, but since it's in there, the record should be corrected:
The relevant question isn't absolute population loss; it's net out-migration. On that score, Pittsburgh hasn't done as poorly as many other regions. See Chris Briem's explanation here.
After reading some of the latest comments, I would have to agree with Casey, Matt and 5-3 @ 7:32. Quality education is a commitment not only of the current generation to their children but from one generation to the next. The taxes I pay beyond the 12 years my kids are in school are what I return to the community for what it has given to my kids'education. I would like to think that those who raised children in the 70's and 80's in Mt. Leb realize what a deal they got for their kids and understand the reciprocal nature of it all. Also, I do believe it is the quality of the curriculum in our district that maintains the real estate values.
j.s.
Post a Comment
<< Home