This referendum will shift school tax from property to income, but it won't do so completely. It is structured in a way that property owners, whose primary residence is within the NASD, will need to apply for an exemption. The exemption will be approx. $486 in year one and $694 in year two. For the property tax money that is not paid due to the exemptions, the earned income tax will be increased for everyone. The tax rate, currently 0.70%, will increase to 1.6%.
The referendum is very important for those on fixed incomes who own homes, many of whom are located in the Borough of Nazareth.
Two important aspects of this seem to be:
- understanding how and when the EIT percent can be increased in the future.
- how the income generated from the EIT correlates to the exemption amount.
For instance with no tax increase, if a person earned $50,000 they would pay $800.00 for EIT (they will also still pay property tax, less the exemption amount if they apply for it). If that person received a 3% pay raise ($51,500) they would pay $824.00.
2. The notice indicates that the exemption amount is expected to be $486 in year one and $694 in year two. Given the natural anticipated increase from raises residents receive, the NASD will generate additional revenue without raising tax rates. To claim no tax increase, this natural increase ought to be reflected in a correlating increase in the exemption amount. It would seem this is the case, but I'm not familiar enough with the Act to know.
This is obviously new to everyone. It is a critical first step in removing the burden of school tax from people on fixed or low incomes who are homeowners. While no one enjoys or likes paying taxes, if we are paying them it ought to be as fair as possible and our current system is not fair. Property does not indicate wealth the way it once did.
There are many questions, but in principle this is a good move and one I am glad the citizens' commission recommended and the Board has put forward.
Would like to hear comments about this and if anyone has more insight please share it. This information will be critical before the election in May when it will be voted on.
I've taken the liberty of breaking up the announcement into sections because it was hard for me to read as one rambling paragraph. Thanks again to Joe for sending it to me.
Public Notice Notice of Intent to Adopt Resolution Authorizing the May 15, 2007 Ballot Question and Resolution Levying and Assessing the Act 1 Income Tax if approved by voters. May 15, 2007 Ballot Question - Notice is hereby given that the board of school directors of the Nazareth Area School District intends to adopt a Resolution authorizing the placement of a question on the May 15, 2007 primary election ballot.
The referendum question will seek voter consent for homestead/farmstead property tax exclusions for qualified homestead/farmstead properties to be financed by the levying of a .90 Earned Income and Net Profits tax.
This notice is given pursuant to the Taxpayer Relief Act, Act 1 of Special Session 2006 ("Act 1") and the Local Tax Enabling Act of December 31, 1965, P.L. 1257, as amended (the "Enabling Act").
The school district currently levies and collects from school district residents an earned income and net profits tax at the rate of .70. The municipality in which the taxpayer resides collects an additional .
Act 1 requires school districts to place a question on the May 15, 2007 primary election ballot asking voters whether the district should provide for homestead/farmstead property tax exclusions for eligible homestead/farmstead properties by increasing its Earned Income and Net Profits Tax rate for the purpose of generating revenue to be used to finance homestead/farmstead property tax exclusions for eligible homestead/farmstead properties.
The school district will increase the tax rate if voters direct this action to be taken. Adding the .90 to the tax collected by the school district would increase the total Nazareth Area School District earned income and net profits tax rate paid by school district residents to increase from the .70 to 1.60.
The municipality in which the taxpayer resides collects an additional .
The proposed Resolution authorizing the placement of a question on the May 15, 2007 primary election ballot provides that the referendum question shall be in substantially the following form, with any additions or changes as determined by the school board or election officials prior to the election:
Do you favor your school district providing for homestead/farmstead property tax exclusions for eligible homestead/farmstead properties by imposing an additional .90 earned income tax? The revenue generated from the tax will be used to reduce taxes on qualified owner occupied residential properties and on qualified farm buildings by approximately $486.00 in 2007-08 to approximately $694.00 in 2008-09.
The current school district earned income and net profits tax rate is .70. The municipality in which the taxpayer resides collects an additional . A copy of the proposed Resolution authorizing the May 15, 2007 ballot question is available for public inspection by any resident at the school district administrative offices located at One Education Plaza, Nazareth, PA on any weekday between the hours of 8:00 a.m. and 4:00 p.m. or on the District's website at nazarethasd.k12.pa.us .
This proposed resolution may be amended before final adoption.
The school board will vote to adopt the Resolution authorizing the May 15, 2007 ballot question at a public meeting held on February 26, 2007 at 7:30 p.m. in the Board Room of the District Office located at One Education Plaza, Nazareth, PA.
Earned Income Tax Increase - If a majority of the voters voting on the referendum question on May 15, 2007 vote "yes," the School Board thereafter in June 2007, will adopt a new Earned Income Tax Resolution increasing the earned income and net profits tax rate collected by the school district from .70 to 1.60 effective July 1, 2007.
The new revenue from the increased earned income tax will be used to finance homestead/farmstead property tax exclusions for eligible homestead/farmstead property. The estimated revenue to be derived by the school district from the earned income tax for the 2007-2008 fiscal year with the increased tax rate is $4,042,735.
Concerning the proposed earned income and net profits tax, the nature of the tax will be substantially the same as the earned income and net profits tax that is currently levied by the school district, except that the tax rate will be increased and credits available against the tax are different for the increased tax rate percent payable pursuant to the referendum.
The tax is levied on earned income received and net profits earned by residents of the School District. "Earned income" is defined in the Enabling Act as "compensation" subject to the Pennsylvania personal income tax, but not including certain types of compensation as specified in the Enabling Act. "Net profits" is defined in the Enabling Act as net income from the operation of a business, profession or other activity subject to the Pennsylvania personal income tax, but not including certain types of net income as specified in the Enabling Act. The tax does not apply to investment income.
Bernadine C. Rishcoff Business Administrator/Board Secretary
Published in The Express-Times on 02/05
5 comments:
Ross-
The difference between year 1 and year 2 tax exemptions is due to the implementation date. The $484 is only for the period after June 1, 2007. The $694 is for the entire 2nd year. (At least that's how I understood it).
Yes, there is an "implicit" tax increase every year with the EIT (assuming people get raises, make more money, etc.). But this occurs whether the EIT is 0.7% or 1.6%. Any future tax increases budgeted by the board (whether subject to referendum or not) will be on property.
What needs to be stressed is:
FILL OUT YOUR TAX EXEMPTION FORMS!
You won't get the tax exemption ($484/694) without filling out the proper forms.
I think, the way I understood it, that this is basing both numbers on the School district fiscal year which begins July 1 and runs through June 30.
How does one determine if one has a qualified homestead/farmstead? I do not see that in the notice.Is this tied to the form we filled out for the county pertaining to homesteads? Keep in mind that some of the townships, Bushkill is one of them, are alsoe going to raise the EIT.
Chris, good point. I recall when people were urged to fill out forms previously, not sure how this will work in year one.
As I understand everyone is eligible whose primary place of residence is within the NASD and they file the exemption.
Having to fill out the form is a way to 'ensure' only primary residences are getting the exemption, but it is also a good way to earn some extra money by not exempting those who are eligible but fail to file.
In the first year (2007), the new 1.6% EIT kicks in on July 1. So, that's the difference in $$. Mr. Scott Shearer passed out some handouts at the Tax Commission Meeting.
As for the Homestead exemption forms... When I moved here from Central PA 7 years ago, I received the forms in the mail. To be honest, I didn't really know what they meant.
Ross, is absolutely correct. People need to fill out the forms, otherwise they will not get the tax exemption.
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