PENNSYLVANIA House votes to raise income tax

The proposal would raise the tax by 7 percent.
HARRISBURG (AP) -- The road to property-tax cuts looked to be growing longer Tuesday as the Pennsylvania House of Representatives approved its own plan, instead of approving a Senate plan supported by Gov. Ed Rendell.
The chamber debated for four hours before voting 103-92 Tuesday night to raise the state income tax by at least 7 percent and remove some exemptions from the state sales tax, such as those on toiletries, candy and dry cleaning.
The legislation had been billed as a $2.3 billion reduction on property taxes, or about $692 for a home at the average assessment, but those figures were in doubt after legislators removed $300 million to maintain an exemption on the value of traded-in goods.
Democrats criticized the legislation as a regressive reshuffling of taxation and spending that would benefit wealthy districts and punish poor districts or those where property taxes are low.
"This is the most whimsical, arbitrary system of tax reduction ever proposed in the history of Pennsylvania," said Rep. Mark Cohen, D-Philadelphia. "This bill is a scandal; it is an embarrassment."
However, many House Republicans criticized the Senate plan as inadequate for achieving property tax reform and defended the House plan as the best chance for significant property tax cuts.
"If you look at these charts, every school district in the state is going to get at least 40 percent more than what they've gotten in the past to fund public education," the bill's sponsor, Rep. Mario Scavello, R-Monroe, said. "How much more can we ask for?"
The House stretched its fall voting session an extra week to deal with property tax cuts. Legislators were scrambling to get something done before the end of the year to tamp down voter anger over the now-repealed pay raises that the Legislature approved in July.
No agreement
Nearly 12 weeks into a special session on property taxes called by Rendell, the Legislature has not agreed on any measure that would cut property taxes. Rendell has said he expects an agreement by the end of the year, and has pledged to make lawmakers work through the holidays to achieve that goal.
Rendell said Monday that he would sign the Senate bill approved last week but also supports removing some sales tax exemptions to enlarge the tax cuts. Senate leaders have said they oppose the expansion of any state-level tax.
Both the House and Senate plans would incorporate anticipated revenue from slot-machine gambling for tax cuts and expand the state's rent and property-tax rebates for the low-income elderly.
The House plan would reduce residential property taxes levied by school districts from about $6 billion to about $4 billion. Under it, the personal income tax would rise from 3.07 to 3.29 percent, while sales tax would be collected on about 20 more goods and services.
With the higher income tax rate, a family earning $40,000 a year would pay $88 more per year.
The Senate plan would require local school boards outside of Philadelphia, Scranton and Pittsburgh to ask voters in May's primary election whether to raise local income taxes to offset property-tax cuts.
If every district approved the minimum offset, $1 billion would be shifted from school property taxes to local income taxes -- a 17 percent reduction on average.