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Tax-Reform Postmortem: Plans Killed in Elections

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Gov. Robert P. Casey's high hopes for sweeping changes in Pennsylvania's revenue system were dashed last week as voters soundly rejected a statewide referendum on tax reform.

The bipartisan proposal, which was opposed by about 75 percent of those voting in the May 16 election, had won legislative approval literally minutes before the 1988 session ended last November.

Aides to the Governor and state education groups had then dubbed the tax-reform bill a "legislative miracle" that seemed to have finally captured the right balance of compromise on the issue.

But the legislation depended on voter approval, and, as one education lobbyist said last week, "The voters have spoken."

In the wake of the constitutional amendment's rejection, observers noted a sharp division in the General Assembly over what had been a bipartisan issue. Republican lawmakers were quick to blame the failure of the Democratic Governor's proposal on his own inability to sell the idea.

At a midnight news conference after the polls had closed, Governor Casey attributed the defeat to the complexity of the issue and confusion over the reform's potential effects.

"Somehow the message did not get through," said the Governor, who is expected to run for re-election next year. "The average person had difficulty relating the benefits of the plan to their own individual circumstances."

The proposal would have shifted the burden of local taxes away from property and toward income, which the Governor argued would create a fairer system over all.

It also called for the elimination of so-called "nuisance" levies, such as occupational-assessment, per-capita, and residence taxes.

School districts and municipalities would have been allowed to increase their income taxes by up to 1.5 percent over four years, in return for property-tax reductions of at least 25 percent.

But the plan also included a series of complicated minor points--such as exemptions for Philadelphia and other "home-rule" municipalities. Backers of the plan said their opponents highlighted the more complex details to confuse voters.

The amendment's defeat means disticts will continue to rely on property taxes as their main source of local revenue.

State education groups, which lobbied heavily in favor of the plan, say the current tax system is regressive and unfair. They argue that it relies on outdated property-assessment practices, and leaves the burden of school funding on homeowners who are retired or on fixed incomes and can ill afford to pay skyrocketing real-estate tax rates.

"These taxes simply do not reflect a person's ability to pay," said George Badner, a spokesman for the Pennsylvania State Education Association."

Spokesmen for education groups that supported the plan said last week that they were surprised that the referendum was rejected by such a wide margin.

"No one realized it would be so one-sided," Mr. Badner said. "Either the voters didn't understand it, or they didn't buy the Governor's message. Or maybe it was just fear of change."

"It's very difficult to assess whether this was a rejection by voters of this plan in particular, or of tax reform in general," added Thomas J. Gentzel, director of government relations for the Pennsylvania School Boards Association.

Mr. Gentzel predicted that state lawmakers would be unlikely to revisit the issue this year after spending nearly two years hammering out the first proposal.

"That plan wasn't perfect, but it was the best the legislature could pass," he said. "There just is not a 'Plan B' to turn to."

In his statement last week, Governor Casey noted that the flawed nature of the current tax system "would not go away by itself."

"We put a plan on the table and showed how we could pay for it," he said. "Now it's up to others to come up with a new plan, put it on paper, and tell us how we can pay for it."

Mr. Gentzel said education groups were "anxious to see what new alternatives may be out there."

Meanwhile, Mr. Badner noted that members of the psea and 12 other education groups were planning to rally at the state Capitol this week to lobby for increased spending on education.

Mr. Badner contended that the rejection of the reform plan would force districts to rely more heavily on state subsidies--especially in communities where property taxes are already high.

Currently, the state covers about 43 percent of districts' costs. Education organizations are urging that the proportion be raised to 50 percent. Mr. Casey's proposed budget, however, would reduce the figure to 41 percent.

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