Tax reform referendum issue will define politics in PA
Pennsylvania voters might finally get to have their say on local property tax reform. Democrat leaders in the General Assembly are proposing a new law giving taxpayers the power to decide whether or not their school district will opt into Act 72 tax reform.
Act 72 is the law passed in the middle of the night last July 4 th that legalized slot machine gambling in Pennsylvania. The law also designated tax proceeds from gambling to go to school districts which would then be required to lower property taxes. Importantly, the new law also gives taxpayers so-called back-end referendum rights – or the power to vote on future major school district tax increases.
Over 400 of the 501 school boards in Pennsylvania rejected participation in Act 72 tax reform, denying their taxpayers property tax relief. The school boards did have one good reason: nobody with even one active brain cell could believe the tax revenue projected to be generated from slot machine gambling will ever be realized. However, the real reason most school boards rejected the reform is because the back-end referendum moves significant budgetary power from them and returns it to the taxpayers.
This has created a political crisis of the highest order for Governor Ed Rendell. He made property tax relief a major campaign issue, and after passage of Act 72 appeared to have delivered on that promise. The Rendell game plan did not anticipate that school directors in such massive numbers would vote against the interests of their own constituents.
That brings us to the current proposal. Act 72 has turned into a tar baby and Democrats are desperate for a solution. Legislators typically oppose giving voters their say via referendum fearing a diminishment of their own power. However, with their backs against the wall – and with polls showing voters want a say on tax reform – Democrats now see a referendum as a political life preserver.
Although their motives are political, Rendell and his legislative allies have arrived at the right place. School boards are simply not going to reform themselves. A few years back a law known as Act 50 was passed which placed spending controls on school districts and gave voters the power to approve budgets which exceeded certain growth restrictions in an individual year. Only four districts in the entire state got to benefit from Act 50 tax reform because the law gave school boards the power to decide whether or not the reform got placed on the ballot. Just a handful of school boards trusted their taxpayers enough to do so, thus Act 50 was largely irrelevant to the vast majority of Pennsylvanians.
That same fatal flaw – allowing school boards rather than taxpayers to make reform decisions – has bedeviled Act 72. Rendell and company were naive to believe the majority of school boards would act in the best interests of taxpayers, thus they allowed Act 72 to pass without placing the decision-making power in the hands of voters where it belonged.
With the gubernatorial election rapidly approaching Republicans in the General Assembly are going to be in no hurry to enable Governor Rendell to escape from the Act 72 quagmire. Predictably, they are also in no hurry to jump on the referendum bandwagon opting instead to watch Rendell twisting slowly in the political winds.
And while there is certain pleasure in beholding that spectacle, and while Republicans can afford to delay action for the time being, they will place themselves at considerable political risk if they do not ultimately support allowing taxpayers to vote this November in an Act 72 tax reform referendum. The simple fact of the matter is the power to decide the structure of our tax system, and the degree to which we are taxed, ultimately resides with the taxpayers. Having that decision made by taxpayers via referendum is a reform which is, in itself, long overdue.
This is a high stakes political issue. There is a tremendous amount of pent-up taxpayer hostility bubbling just below the surface in Pennsylvania. The party that is seen as siding with taxpayers on the tax reform issue will find itself with the ability to tap into an artesian well of voter support. At one time Democrats were seen as the party of the people. Now Republicans are perceived to be the party of lower taxes. But, Act 72 has turned the issue into a jump ball. Whoever comes down with it is going to control the game in Pennsylvania for a long time to come.