Governor Rendell Announces Largest Property Tax Cut in Pennsylvania History

$1 Billion Program will Provide Targeted Relief to Pennsylvania Senior Citizens

HARRISBURG, Pa., June 14 /PRNewswire/ -- Governor Edward G. Rendell tonight said that the Pennsylvania Special Session on Property Taxes was a success after the House of Representatives passed Special Session House Bill 39. Governor Rendell called the Special Session last September after nearly two thirds of Pennsylvania homeowners were denied property tax relief by local school boards.

The Governor congratulated legislative leaders from both chambers for a successful special session on property tax relief. The Governor thanked Minority Leader William DeWeese, Minority Whip Michael Veon, Speaker of the House John Perzel and Majority Leader Sam Smith for leading the effort in the House of Representatives. He acknowledged Senate leaders for their successful work leading the upper chamber.

SS HB 39 delivers the largest property tax cut in Pennsylvania history -- $1 billion annually to Pennsylvania homeowners. Pennsylvania seniors will get the most significant property tax relief through an expansion of the Property Tax Rent Rebate program.

"Last September, I asked the Legislature to deliver a clean, simple and responsible tax cut for all Pennsylvania homeowners, and working together -- we did it," said Governor Rendell. "I asked the Legislature to craft a bill that delivers property tax relief to every homeowner using gaming funds, and that maintains the taxpayers say in future tax increases. This bill delivers exactly what I requested and so much more.

"We have repaired our compact with the citizens, and delivered on our promise to use gaming money to cut their property taxes by $1 billion annually. We have keenly focused on the needs of senior citizens, which will help stem the flow of our older citizens leaving their homes because property taxes are too high. We have responsibly given voters a voice in their future property tax increases while protecting our school districts' ability to do their jobs."

In addition to guaranteed property tax relief for every homeowner from gaming, under SS HB 39, Pennsylvania voters will have the option of reducing their property taxes by at least another $1.4 billion in the spring of 2007 by voting to shift a portion of their property taxes to local income taxes.

The Governor said, for example, that an average homeowner in Bristol Borough School District pays approximately $1,724 in school property taxes. Under Act 72 they would have received about $182 once the first gaming distribution occurred at $500 million. Under SSHB 39 they can receive two types of tax relief:

* A $146 property tax reduction once gaming reaches $400 million;
* And a $451 property tax cut starting in 2007 if voters in the school
district approve the minimum shift to increase the earned income tax in
order to reduce property taxes
* Total property tax reduction of $597, or 35%.

"Under Act 72, that Bristol Borough taxpayer would have benefited, no question, but under this bill they could see $415 more in tax relief -- and sooner because gaming money will now wisely be distributed once the fund reaches $400 million," said Governor Rendell.

SS HB 39 also ensures that more than $250 million of the $1 billion from gaming will go to seniors with incomes under $35,000. Nearly 600,000 Pennsylvania seniors will benefit from higher state rebates or will be added to the state rebate program for the first time by increasing the maximum income limit to $35,000 (which excludes half of Social Security income) and raising the top rebate to $650.

"Last September, I said our work will not be done until we remove any and all barriers to lower the school tax bills of every single homeowner with our gaming proceeds -- our work will not be done until we ensure both property taxes cuts and more voter control," said Governor Rendell. "While our work is never really finished as we work to improve the lives of Pennsylvanians, today we made a tremendous step in the right direction."

Other key improvements from Act 72 include:

* Faster property tax relief. Pennsylvania's senior citizens -- who are
on fixed incomes and need the most immediate tax relief -- will not have
to wait for the revenue from gaming to start coming in before they
receive tax relief. And relief for all taxpayers will come sooner as
well because the Act 72 requirement that $400 million from gaming be
held in reserve before property tax relief could even begin was revised
to set a reserve as low as $100 million. This more reasonable reserve
level will expedite the delivery of broad-based property tax relief.

* No State imposed income tax shift. Act 72 required school districts to
raise their earned income tax (EIT) by one-tenth of a percent in order
to qualify for state-funded tax relief. Now every school district will
be able to receive tax relief from the state -- without any mandate to
raise local taxes. The Taxpayer Relief Act leaves the decision to shift
to income taxes up to local voters, with no strings attached.

* Greater taxpayer control over future school tax increases in every
school district. Beginning this year, taxpayers in every school
district will have a greater voice in tax increases. School boards will
still be able to raise property taxes each year to keep up with
inflation -- and even more in many communities -- but sensible and fair
voter controls mean that taxpayers will now have a direct say in the
most extreme tax increases. School boards do not have the option of
refusing to abide by these limits -- as they did in Act 72 -- by
"opting-out" of property tax relief.

* More flexible referendum exceptions. Act 72 provided 10 exceptions that
school boards could seek in order to raise taxes faster than inflation
because of emergencies or educational necessities. The Taxpayer Relief
Act maintains all of those exceptions -- and adds greater flexibility
where school districts need it the most. The new law wisely expands the
exceptions for special education, health care costs and pension
obligations.

* New ability to combat high wage taxes. The Taxpayer Relief Act gives
Scranton the power to use up to half of its state allocation from gaming
to reduce its wage tax -- which is the second highest in the state. The
law also maintains Philadelphia's historic wage tax relief, which when
combined with the city's own mandated tax reductions will bring the wage
tax below 4% for city residents starting in 2009. Because cities with
high wage taxes will be unlikely to ever make a shift to increase their
earned income taxes to fund property tax relief, senior citizens in
Pittsburgh, Philadelphia and Scranton who earn up to $30,000 a year will
have their property tax rebate increase by an additional 50%.

The Rendell Administration is committed to creating a first-rate public education system, protecting our most vulnerable citizens and continuing economic investment to support our communities and businesses. To find out more about Governor Rendell's initiatives and to sign up for his weekly newsletter, visit his Web site at: http://www.governor.state.pa.us/ .