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Tax Overhaul Is Awaiting Voters' Approval in Pennsylvania

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Pennsylvania voters will be asked this spring to endorse major changes in the way local school revenues are collected, under legislation signed by Gov. Robert P. Casey last month.

The tax-reform plan, which had been debated for nearly two years, would allow school districts to increase local income taxes in return for cuts in property taxes and the elimination of per-capita, residence, occupational-privilege, and other "nuisance" taxes.

The measure won final approval in the Senate at 11:58 P.M. on Nov. 30, just two minutes before the end of the legislature's 1988 session.

Governor Casey, a Democrat, first called for the tax changes in his January 1987 inaugural address. The bill passed by lawmakers was based on recommendations by a blue-ribbon panel that he and the legislature created in November that year.

According to Thomas J. Gentzel, a lobbyist for the Pennsylvania School Boards Association, the proposal re4presents "a big step in the right direction." He said it would give all districts more flexibility in taxation and allow those with low property values to generate additional revenues for schools.

George Badner, a spokesman for the Pennsylvania Education Association, said the state's education organizations plan an intensive lobbying effort to win its endorsement at the polls.

Tax reform, however, is only one part of the battle to revise Pennsylvania's school-aid system, Mr. Badner added. In the coming year, the pea and other groups will press the Governor and lawmakers for a major increase in aid to districts, which Mr. Badner said is now about 10 percent to 15 percent below what the state funding formula requires.

The proposed tax changes would take effect in 1990 if they are approved by voters during a special election tentatively scheduled for May.

Robert Feir, legislative liaison for the state board of education, said the proposal would allow districts gradually to raise their local income-tax rates, from the current maximum of 0.5 percent to 1.5 percent, over a four-year period. Some districts could seek court approval to raise their rates more quickly, he added.

Districts that raise their income taxes would be forced to reduce property taxes by at least 25 percent. In addition, they would have to eliminate their nuisance taxes, which Mr. Feir noted are typically difficult to collect.

State education officials said the plan's effects would vary among districts due to differences in the types of taxes they levy.

Robert Grotevant, a spokesman for the Governor, described the bill's passage as a "legislative miracle."

"There were certainly some pretty dark moments," he said. "But, after 20 years, everyone in Pennsylvania has realized that high property taxes were driving people away" from the state and depriving many of the chance to own a home.

Opposition to the bill was centered in the Republican-controlled Senate.

Senator Joseph Loeper, the chamber's majority whip, had argued that the legislature had not been given adequate time to study the proposal. The plan's backers, meanwhile, claimed that the Republicans were simply trying to deprive the Democratic governor of a major legislative victory.

Intense lobbying by the Governor persuaded five Republicans to break party ranks and vote for the measure moments before the session's conclusion. Observers said the Senate was able to beat the deadline only because the Democratic lieutenant governor, who was presiding at the time, ignored the shouted protests of Senator Loeper.

The bill's critics predict that they and taxpayers' groups will be able to persuade voters that the plan needs work and should not be approved.

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