NK-Arnold panel endorses tax shift

| Thursday, Nov. 30, 2006

The New Kensington-Arnold School District's local tax study commission has recommended a tax shift that would rely less on the property tax but increase the wage tax by nearly 1.5 times.

According to the school district's analysis, anyone earning less than $36,200 would pay less in school district taxes and those who earn more in wages would pay more overall taxes, the combination of property and wage taxes, to the district.

According to the district, just under 60 percent of Arnold and New Kensington households have an income less than $35,000. That means that six out of every 10 households would pay less overall taxes to the district under the proposed change.

However, the board did not provide examples that would show the relationship between the reduction in a homeowner's property tax and the increase a wage earner would pay in additional wage tax.

The nonbinding recommendation will go to the school board. Then, after a public hearing, the board is scheduled to vote March 13 on whether to place the recommendation on the May election ballot. State property tax-relief law requires every school district to go through this process with a tax study commission.

Without cutting spending, property-tax reductions require wage tax increases to make up the difference.

The recommendation increases the school district wage tax to 1.2 percent -- a 140 percent increase from the current 0.5 percent.

That means that New Kensington-Arnold wage earners would pay 1.7 percent overall, because the cities of Arnold and New Kensington collect a 0.5 wage tax, too. The wage tax is also called the earned income tax.

The commission had the option to switch to a personal income tax, like the state collects. Personal income includes all investments, interest, and gambling winnings in addition to wages.

But New Kensington-Arnold's tax commission decided that would cause more tax burden on retirees, who earn some of their income from interest and dividends.

The commission's preliminary report said although renters will not benefit from the tax shift, it would benefit people who own homes and invest in the area.

Chairman Jim Rice suggested the change might encourage more home ownership, which he said was around 60 percent.

"If someone is looking to move somewhere, we feel it would be an incentive to buy a house in our area and get some relief," he said.

New Kensington-Arnold officials said the tax commission was required to recommend at least some change in the tax mix, but voters can oppose it if they want no change.

However, the tax commissions at Highlands and Riverview voted to recommend no change in the tax mix -- continuing to rely the same amount on property tax but also keeping their wage tax the same.

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