HARRISBURG Plan combines income-tax increase, gambling revenue

The budding compromise hinges on more gambling than just legalized slots.
HARRISBURG, Pa. (AP) -- A compromise plan that is gathering momentum in budget talks between key lawmakers and Gov. Ed Rendell would let voters in school districts decide whether to approve an income tax increase, then combine that money with gambling revenue to finance property-tax relief.
Although details changed seemingly by the hour Wednesday, the plan has conceptual support from several top Republican lawmakers and the Democratic governor after weeks of disagreement over competing plans to reduce property taxes, including a Senate GOP plan and a veto threat from Rendell.
Rendell and House lawmakers say they hope to firm up a package to be introduced when the House reconvenes next week.
Striking a balance
The deal would strike a balance between Democrats' desire to inject substantial state money into reducing local property taxes and Republicans' insistence that any decisions about increasing taxes to pay for property-tax reform be made by voters and not lawmakers.
One point of agreement is a plan that would require school districts to hold referendums in November asking voters whether to approve a slight income-tax increase.
Districts that approve the tax increase would then receive that amount plus a multiple of that in gambling revenue to put toward public schools, effectively lowering the property taxes that typically finance local education costs.
The multiple of the gambling money that would be assigned to each district would be based on its relative wealth.
"Conceptually, there is a lot of agreement that this may be a good way to go," said John Estey, Rendell's chief of staff.
Drew Crompton, an aide to the Senate president pro tempore, Robert C. Jubelirer, R-Blair, said that the plan has "merit," but cautioned that much of it is still taking shape.
Among the details that remained unclear are the formula to distribute gambling money or which tax voters could consider raising -- either the state personal income tax, which is applied to dividends and other capital gains, or the local earned-income tax, which is not.
Revenue calculation
Under a calculation by House Speaker John Perzel, if every district were to approve the proposed 0.06 percent increase in the state personal-income tax -- taking the tax rate from 2.8 percent to 2.86 percent -- it would generate $140 million. If some districts reject the state's offer of additional dollars from the gambling revenue, then more would be left over for those districts that approve the plan, Perzel said.
The budding compromise hinges on a wider expansion of gambling than Rendell's proposal to legalize slot machines at eight racetracks. That plan squeaked by in the Senate and is resting in the House, where party leaders are negotiating over how it can be expanded.
House Democrats hoped to fashion a gambling plan that would bring in $1 billion. Estey said the governor wants any plan to generate at least $800 million and as much as $1.5 billion -- the amount Rendell originally hoped to raise through legalizing slots and an array of tax increases.
Perzel says he could support allowing slots at as many as 11 racetracks. To achieve that, Perzel advocates combining some of the racing licenses that are currently issued to free up three additional licenses to cover the additional new tracks.
"I think as long as we stay within 11, we haven't violated the trust that we have from the Senate," Perzel said.
Last month, a Republican-sponsored bill on property taxes passed the Senate, but drew a veto threat from Rendell because it did not address a way to supply more property-tax relief to poorer districts.