In more than half of York County school districts, families owning a home and earning as little as $40,000 per year would lose money under changes being considered because of tax reform legislation.

That’s the story for the first year, if the voters approve the tax changes.

Homeowners’ savings would rise significantly in the second year, but there is no certainty voters will have that information when they show up to cast ballots on tax reform referendums in the May primary.  And many predict residents will be disappointed by tax reform, regardless of the outcome of those referendums.

“I believe that people expected this (legislation) to do much more than they’ll discover it does, and that is disappointing,” said Donald Yoder Jr. president of the Dallastown Area School Board. “I would hope that real school funding reform remains a priority of our legislators and our governor.”

On May 15, voters will be asked whether the earned or personal income tax should be increased in their school district. Money raised by the higher tax would be used to provide property tax breaks on homes.

School boards across the state are reviewing recommendations from their own tax reform commissions before settling on what proposal to put before voters this spring.

In Dallastown, for instance, the tax commission has recommended a 1 percent increase in the earned income tax, which means a family with an income of $40,000 would pay an additional $400. The first-year property tax break on a home in the district is estimated at $418, meaning that family would save $18.

The property tax savings in the second year are estimated at $597 per home. That means the family earning $40,000 would save $197.

Projected savings: The reason for the second-year jump in property tax savings is simple to explain, school officials say.

If voters agree to shift taxes, some of the new revenue from the earned income or personal income tax won’t be available in year one because of a delay between the time employers collect the tax and the time school districts receive the money.

West York, like Dallastown, is considering a 1 percent increase in the earned income tax. Estimated first-year savings for homeowners is $362, meaning a family paying the higher earned income tax on a $40,000 income loses $38. But, in year two, the savings increase to $517, meaning the family earning $40,000 would save $117.

The state Department of Education was expecting that situation, said spokesman Mike Storm.

School districts will receive between 60 and 80 percent of the income taxes collected the first year, and between 95 and 100 percent in subsequent years, he said.

What will voters know? But voters who aren’t familiar with the tax revenue structure might not know about the second-year increase; the referendum question isn’t likely to include such an in-depth discussion.  The question on the ballot will vary by school district, but the state-recommended template is as follows:

“Do you favor imposing an additional ___ percent earned income tax? The revenue generated from the increased tax rate will be used to reduce taxes on qualified residential properties by $ ___. The current income tax rate is ___ percent.”

Dover Area school board member Judy McIlvaine was her board’s representative to a tax study group charged with recommending the wording for the ballot question. She said some school officials are researching whether the ballot question could include the second-year figures.  But that’s not an idea she supports, because it could raise voters’ expectations for property tax relief and lead them to expect savings that might not be attainable, she said.

At this point, the second-year savings are only estimated. There are variables that will affect the amount of money returned to property taxpayers, she said.

One example would be if there is an increase in the number of homeowners who are eligible for the property tax reduction, she said. The money would then have to be split among a larger group of people.  She said putting forward the lesser amount is probably more accurate.

How will voters react? And she doesn’t think that estimating with the lower number will affect whether voters approve the recommendation.  She said school officials must write a “plain English explanation” for voters to reference on election day. They are also looking into whether the second-year savings could be mentioned in that explanation, she said.

State representatives Ron Miller, R-Jacobus, and Stan Saylor, R-Windsor Township, voted against the legislation.  Miller said he isn’t sure whether voters will be turned off by the lower estimates for the first year of the shift.

“I think the people that like this plan aren’t going to have a problem with it, but the people who vote ‘no’ will do so because they think the whole thing (legislation) is a farce. The big issue is whether or not this is meaningful property tax reform.”

Saylor said people might be confused by the discrepancy in property tax breaks, but they will probably vote for the referendum.  “It has been such a mess, I don’t know what to expect from taxpayers,” he said.

He offered an equally harsh assessment of the legislation, referring to it as “a piece of crap.”

-- Reach Christina Kauff man at 505-5436 or ckauffman@yorkdispatch.com.

Facts on Act 1

Act 1 Property Tax Reform calls for a voter referendum that could shift some of the school district tax burden away from property owners by increasing either the earned or personal income taxes on all residents of the school district.

---Earned vs. personal income

Earned income tax is levied only on residents’ earned income, such as wages and salaries.

A personal income tax includes income from wages, interest, dividends, net income or loss from the operation of a business, profession or farm, the net gain or loss from the sale, exchange or disposition of property, the net income or loss from rent, royalties, patents and copyrights, income from estates or trusts and certain gambling and lottery winnings. It does not include pensions or Social Security.

---Who’s eligible for tax relief?

If voters approve the referendum, homeowners whose properties were approved as a homestead will be eligible for property tax relief. Homesteads are owner-occupied properties, not rentals, investment properties or businesses. Homeowners whose properties were deemed homesteads under earlier legislation (Act 72) are still approved and don’t need to do anything.

Homeowners who did not return the Act 72 application, or those whose applications were rejected, must fill out another application and return it to the York County Assessment Office by March 1.

---How much will you pay?

To calculate the increase in your earned income tax, multiply your gross earnings per year times the percent increase that will be on the ballot in your school district.  For example, you earn $40,000 and your school district proposed a 1 percent increase in the earned income tax. The formula would be: $40,000 x .01 = $400. You will pay an extra $400 per year in earned income tax.

---When will the vote take place?

In order for the tax shift to occur, a majority of voters in the school district must vote to approve a referendum in the May 15 primary election.

Sources: Pennsylvania Department of Education, Pennsylvania Department of Revenue.