HARRISBURG -- A complicated process would stand between Pennsylvania homeowners and an estimated $1 billion in property-tax relief if a House compromise becomes law, although an architect of the plan predicted Friday that its benefits would overcome any fear of paperwork for most people.
"It's a lot of money," said Donna Cooper, Gov. Ed Rendell's policy director.
Under the pending plan, a hybrid backed by House Republican and Democratic leaders as well as Rendell, people who apply for a "homestead exclusion" through their county tax assessors should see an average 20 percent reduction in their property-tax bills. Those who don't apply won't get any relief.
"When they see their neighbors getting a $300 property tax (reduction) and they didn't ... we anticipate they will ultimately get on the homestead list" in subsequent years, Cooper said.
As of Friday, the conventional wisdom was that revenue for the plan -- roughly two-thirds of the amount Rendell promised in his election campaign last year -- would come exclusively from a bill that would legalize slot machines at 11 locations throughout the state.
Overall, the bill calls for modest increases in income taxes levied by local school districts to be matched by significantly larger amounts of state money, with the largest shares of the state dollars going to the neediest districts.
In each district, the combined state and federal money would offset an equivalent amount of tax relief through the existing homestead-exclusion program, which exempts part of the value of owner-occupied real estate from property taxes.
Homeowners would have to apply for homestead exclusions by March 1. The bill would require school districts to send copies of the application form and instructions to property taxpayers in December and January.
Under the proposal, local school districts would have 30 days to approve a 0.1 percent increase in the local income tax. This could be done by establishing an earned-income tax in that amount, increasing an existing earned-income tax, establishing a personal income tax -- a new type of tax that would be authorized by the bill -- or converting an earned-income tax to a personal income tax.
If the amount of that increase coupled with the state match is less than half of the maximum homestead exclusion, the district would be required to hold a November referendum on an additional local income-tax increase that would bring in additional state funds to reach that level. Districts at or above the 50 percent level could seek voter approval for an additional local income-tax increases to cover up to 100 percent of the homestead exclusion, but without additional state money.
The average homestead would qualify for at least a $287 exclusion, according to analyses prepared by the House Democrats and Republicans. Minimum exclusions in individual districts would range from $804 in Radnor Township School District to $38 in the Juniata County School district.
In the Philadelphia School District, the state tax-relief money would be used to reduce the city's wage tax.
The state Senate has approved a bill that would keep property-tax relief at the local level. Under that bill, voters in most of the 501 school districts could eliminate as much as $2.2 billion of the $7.2 billion in property taxes by replacing them dollar-for-dollar with an earned-income tax.
But a spokesman for Senate President Pro Tempore Robert C. Jubelirer, R-Blair, said leaders of the Senate Republican majority are intrigued by the House plan.
It's "something that our leadership seems to be fairly interested in pursuing," said J. Andrew Crompton, Jubelirer's counsel.
