Penn State Extension suggests how to avoid taxing conversations

October 23, 2008

In a poor economy, complaints over levies get louder. These forums help citizens and officials find common ground on tax fairness and reform

When the phone rings at the Stroud Township office, supervisor Ed Cramer knows that a confused — and often angry — taxpayer may be on the other end of the line.

Cramer can sympathize. The number of authorities and the varieties of taxes that are levied aren’t always easy to follow. Pennsylvanians pay taxes to local, school district, county, state and federal authorities. The types of taxes include income, real estate and sales.

Throw in a poor economy and a lack of understanding about how local governments spend this tax money, and you have all the ingredients for a long and contentious telephone conversation.

“When people call to complain I really try to walk the taxpayer through how we arrive at our tax structure and how we spend the money,” Cramer said. “I want them to know how much they’re paying and exactly what services they’re getting.”

From contention to cooperation

Such taxpayer grumblings have led Penn State Extension — a unit of Penn State Outreach — and the County Commissioners Association of Pennsylvania (CCAP) to offer a new series of local tax forums for taxpayers and local government officials, like Cramer, to discuss the complex issues of taxation and tax fairness and reform.

William Shuffstall, senior educator for Penn State Extension and a tax forum organizer, said taxpayer reaction to the first two forums held in Monroe and Lycoming counties last spring were positive. “I had people approach me after the forum and tell me they thought they knew a lot about tax reform,” Shuffstall said. “But now they have a whole new perspective on the issues.”

Shuffstall explains that the forums do not advocate a position or attempt to help create a fair tax solution for communities; they present the issues to inform taxpayers and connect them with their state legislators, who have more power in these matters. The forums start with a 20-minute introduction on how tax revenues are generated and spent and go into the hurdles of developing a fair tax balance.

Kristen Goshorn, government relations manager for the CCAP, said that this neutral position helps to create a spirit of cooperation between the local elected officials and their constituents.

“Too often, taxpayer frustration over property tax issues is played out in adversarial situations, such as the public meeting where a tax increase is being considered, or in the newspaper headlines and editorials afterward,” said Goshorn. “The forums give local taxpayers and elected officials the opportunity to work together on a solution, and the taxpayer also has the opportunity to learn more about what their local officials provide with property tax dollars.”

Thomas A. Zimmerman, a director for the Williamsport Area School District and a regional director of the Pennsylvania School Boards Association, said that he believes that the forum he attended improved taxpayer understanding.

“I was very impressed,” Zimmerman said. “There was uniformity across the groups, a collective ‘Wow’ about how complex the budget process actually is. I think a lot of taxpayers came away with that insight.”

Checking for fair balance

Timothy Kelsey, Penn State professor of agricultural economics and Extension state program leader for Economic and Community Development, organizes the forums with Shuffstall. He explained that tax reform in Pennsylvania over the past 10 years has been about shifting, not cutting, taxes, and that finding a fair balance must be a local choice. “The question becomes: ‘How do you apply these taxes fairly?’ ” he said.

Kelsey pointed out, for example, that Sullivan County is a small, sparsely populated county with a large number of vacation homes owned by nonresidents. A shift of emphasis from a real estate tax to an income-based tax structure would place more of the burden on full-time residents, who would be paying for the tax breaks enjoyed by nonresident property owners. This type of shift (which is not occurring) would be perceived as unfair by many county residents, explained Kelsey.

“It really becomes a value choice,” Kelsey said. “And those values can vary from county to county.”

Shuffstall said that one revenue-earning hurdle is that the state gives local and county governments the permission to collect only certain taxes. Counties can levy real estate taxes, an occupation tax or per capita tax, and a hotel tax that can only be used to build a tourism or convention center. Local governments and school districts are afforded more flexibility by the state, but are still restricted in what types of taxes they can apply.

Spending is tightly regulated by mandates and citizen expectations. “Expenditures are also greatly influenced by state and federal mandates,” Shuffstall said. “For example, these mandates take approximately 80 percent of a county’s budget, which means that commissioners really have control of only 20 percent of their budget.”

Due to the school code mandates and collective bargaining unit agreements, local school boards have control of less than 15 percent of their budgets.

On the other side of the equation, citizens are reluctant to see a decrease in services provided by their local governments. This leaves little room for budget cuts.

As the economy treads on shaky ground and as money continues to get tight for taxpayers, tax forums may become more important in establishing the lines of communication between official and constituent. “As the economy gets worse, it gets tougher for the taxpayer,” Cramer said. “More people are going to be turning to the government and asking how much are they paying in taxes and what services are they getting for that money. It’s important to be prepared how to explain things and have an open discussion.”


This story is from the fall issue of Penn State Outreach magazine. Go to
http://www.outreach.psu.edu/news/magazine/CurrentIssue/ to view the magazine online.

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Last Updated March 19, 2009