Concerns Behind Local Tax Reform

Pennsylvania's local governments and school districts have a variety of different local taxes available to them.  They can pick and choose the taxes that they feel are fairest and best for themselves, taking into account their local needs, values, and local population.  Local governments and school districts cannot make up their own taxes, however; they can only choose from the taxes permitted them by the state, and cannot state-set limits on tax rates.

Pennsylvania politicians have struggled with the issue of local tax reform for more than a decade, attempting to develop a mix of new local tax options for county and municipal governments, and for school districts.  Several concerns have been fairly consistent throughout these tax reform discussions,  including:

1. Local Choice  Local governments and school districts should not be forced to change over to any new local tax system; many people argue that each jurisdiction should have the choice of whether to stay with the current menu of local taxes or to switch to the new system(s).  Tax reform is intended to provide a new set of options at the local level, not to simply to have the Commonwealth mandate a change.  This concern about local choice, in part, is a recognition that Pennsylvania communities are widely different, and that "one size fits all" doesn't easily work.

2. Shifting, Not Overall Tax Cuts The main focus of much of the local tax reform discussion has been on how to shift the local tax burden, not to simply reduce it.  In other words, after reform the total amount of local tax dollars collected by a local government or school district won't be less; but the amount of those dollars collected from a widely perceived unfair tax (such as the real property tax) might be much less while more will come from a fairer local tax (such as an income tax). 

This "shifting" focus also means that tax reform isn't meant as a windfall for local jurisdictions; local tax reform proposals have fairly consistently mandated that any new tax dollars be used to reduce other local taxes.  After reform is implemented, the amount of tax dollars collected by local governments and school districts should remain the same as before tax reform.

These two principles underlie several aspects of the Act 50 of 1998 and Act 24 of 2001, and likely will remain in future local tax reform discussions.