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Rendell plan would lower local taxes, raise state income tax

Revenue for schools would also come from slot machines, beer tax, and cell phone tax.

This article was originally published in The Notebook. In August 2020, The Notebook became Chalkbeat Philadelphia.

The centerpiece of Governor Ed Rendell’s recently proposed education plan is a shift in the source of school funding from local property taxes to the state level.

The plan calls for $1.5 billion in state revenues to go to school districts to support a reduction in local property taxes. The average reduction will be 30 percent, with every district receiving at least a 15 percent reduction. This part of the proposal will not result in any increase in school funding; it is a dollar for dollar shift, replacing each local dollar with a dollar of state revenue.

In Philadelphia, the reduction in local taxes would be to the wage tax rather than to the property tax. The wage tax reduction for both city residents and commuters would be 13.51 percent.

The plan also proposes a package of several different sources of new revenue to fund the governor’s education investment funds and accountability program (for information on the education plan, see related article):

  • Personal Income Tax — The proposal calls for an increase in the state personal income tax from 2.8 to 3.75 percent. Even at this higher rate, Pennsylvania would still have the third lowest personal income tax rate in the 41 states that assess the tax.
  • Closing Tax Loopholes for Business — The plan calls for the closing of two specific corporate tax loopholes to ensure that businesses pay their fair share.
  • Limited Slot Machines at Racetracks — The plan proposes a limited expansion of gaming in Pennsylvania to permit slot machines at Pennsylvania racetracks. Racetrack owners would then be taxed on the income generated by the machines.
  • Increased Beer Tax — The plan calls for the first increase in the beer tax of 8 cents a gallon since 1947. The new tax would be 25 cents per gallon.
  • Reckless Driving Surcharge — This proposal includes a number of surcharges for tickets, drunken driving offenses, and suspended licenses.
  • Telecommunication Taxes — This proposal would expand the Gross Receipts Taxcurrently levied only on land line telephone business, extending it to cell phone and pager businesses as well.

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