The defeat of the 1989 referendum resulted in increasing pressure on the real estate tax, particularly by school districts needing additional revenues. Public pressure moved legislators to reopen the issue of restructuring the local tax system as early as 1993. A constitutional exemption authorizing homestead exclusions was passed by two successive legislatures and approved by the voters in November 1997. Legislation to implement the amendment was enacted by the General Assembly and signed by the Governor in May of 1998. Act 50 of 1998 enacts various

local tax provisions into Title 53 of the Pennsylvania Consolidated Statutes.7

The Act includes peripheral matters of tax administration, including a local taxpayer bill of rights, an optional tax deferral program and implementing procedures for the homestead exclusion program. All local taxing bodies, counties, municipalities and school districts

are subject to these sections. General provisions at the beginning of the Act prohibit any additional school districts from enacting an amusement tax after June 30, 1997 and any municipal amusement tax levied after December 31, 1997 is limited to five percent. The gross receipts tax freeze is continued. Sign privilege taxes are prohibited as are motor vehicle transfer taxes, except for the three sign privilege taxes in place before December

31, 1997.

 The bulk of the Act is composed of procedures that can be used by school districts to move to an earned income tax of up to 1.5% with offsetting elimination of per capita, occupation and occupational privilege taxes and reduction of the real estate tax rate. Any real estate reductions must be implemented first through adoption of the homestead exclusion. Any change in the tax system under the Act must

be approved by the voters in a referendum, as must any future increases in real estate taxes reduced by the proposal.

References

1. 53 P.S. 15971; 1932(Ex.Sess.) P.L. 45.

2. 72 P.S. 7359; Tax Reform Code, Section 359(b); Leonard v. Thornburgh, 489 A.2d 1349, 507 Pa. 317, 1985.

3. 53 P.S. 16101(a); 1963 P.L. 640.

4. 53 P.S. 6917(a) Local Tax Enabling Act, Section 17(a); Prior v. Borough of Eddystone, 374 A.2d 981, 30 Pa.Cmwlth.

5. Thompson v. West Branch Area School District, 505 A.2d 386, 95 Pa.Cmwlth. 288, 1986.

6. 72 P.S. 4750.101; 1988 P.L. 1121, No. 145.

7. 53 Pa.C.S. 8401 et seq.