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Like many business owners who first endured a recession and then years of sluggish growth and economic uncertainty, Susan Linski appreciates every dollar saved. She generally supports calls for lower taxes, including those on real estate. Linski pays about $9,000 annually in school property tax to both the Allentown School District, in which she owns the Susan Bella jewelry store, and the Parkland School District, in which she owns a home. "It's difficult to run a profitable small business as it is, and then if you're profitable, a lot of it goes back to the government anyway," she said. Yet Linski, like many business owners, is leery of the persistent drive to eliminate the school property tax, expected to generate more than $14 billion in Pennsylvania for the 2017-18 school year. That's because the Property Tax Independence Act — which the state Senate nearly passed in 2015 and is expected to reintroduce this year — would not simply eliminate the school property tax. It would phase it out and replace it with increases in the state personal income and sales taxes, as well as expand the number of taxable goods and services. The tradeoffs, she believes, aren't worth it. Whatever profit Linski turns at Susan Bella Jewelry, 1742 Allen St., would be subjected to a 61 percent personal income tax hike, to 4.95 percent from 3.07 percent. She's even more concerned about the impact of a proposed increase to the sales tax, to 7 percent from 6 percent. That makes a $10,000 diamond ring in her store $100 more expensive after tax, likely driving even more potential customers to Amazon.com and other websites where they can avoid sales tax. "The local airport is expanding just to accommodate Amazon," Linski said. "Big-time e-commerce retailers don't need any more help putting stores like mine out of business." Crippling taxes Versions of the Property Tax Independence Act have circulated in Harrisburg for more than a decade. But the state Senate came within one vote of passing the bill in 2015, and a few candidates who voiced support for the bill last fall won elections. Sen. David Argall, R-Schuylkill, said in April that he would not reintroduce it until he and co-sponsors were sure it could pass, but he added, "we're where we want to be." A spokesman reiterated in the last week that Argall will reintroduce the bill "in the near future." The bill has ardent support from the state's most reliable and vocal voters — homeowners who are retired or approaching retirement. Nearly three-quarters of collected property taxes went to fund schools during the 2014-15 school year, the last year on record, and annual hikes are essentially a foregone conclusion in many districts. Property tax hikes over the past 25 years have outpaced inflation and wage growth, according to the Pennsylvania Independent Fiscal Office, which projects property tax revenue to increase 3.8 percent annually from 2018-19 to 2021-22, by which time it will hit $16 billion. Those for and against the bill acknowledge that the hikes are largely the consequence of growing pension costs and other unfunded state and federal mandates. Under the bill, homeowners would get a break and businesses would see a boon, supporters say. A 2013 Independent Fiscal Office analysis assumed homeowners would spend 80 percent of their new property tax savings, mostly on taxable goods and services. Renters interested in home ownership, they say, would be more likely to start looking. Businesses would reap the benefits, said Sen. Mike Folmer, R-Lebanon, an outspoken supporter of the bill. "People are going to spend the disposable income saved from their property tax bill," he said. "This will be great for the economy." Older homeowners, especially those who are retired or have no school-age children, make their own case about shouldering an onerous burden. Per capita home mortgage debt increased 47 percent for people 65 to 75 years old from 2003 to 2015, according to the Federal Reserve Bank of New York. The Consumer Financial Protection Bureau attributes the rise in part to a refinancing boom last decade and the increase in seniors borrowing against their home equity to pay for other expenses, including higher taxes. Less competitive Many business associations, including the Greater Lehigh Valley Chamber of Commerce and the Pennsylvania Chamber of Business and Industry, disagree the tax shift will help the economy. While acknowledging that some businesses would benefit, they believe the shift would make the state less competitive against surrounding states in attracting both workers and consumers. They also believe the shift would perpetuate inequalities between property-intensive corporations and small businesses whose owners often rent property. In the Lehigh Valley, three-quarters of the chamber's member businesses have 15 or fewer employees. School property tax elimination could slow rent hikes, but it's doubtful landlords would go so far as to cut rent, said Jeff Berdahl, chairman of the chamber's tax committee and a partner with RLB Accountants in Allentown. "From a business owner standpoint right now in this economy, I don't think it's a good idea to be raising personal income taxes or sales taxes," Berdahl said. "A majority of business owners will pay the income tax hike. That's less money to put back into hiring." In fact, more than four out of five businesses in Pennsylvania would see their profits hit by the hike to the personal income tax proposal, said Carl Marrara, vice president of government affairs for the Pennsylvania Manufacturers Association. "You're talking about a potential near-doubling of the PIT on all the small businesses in the commonwealth," Marrara said."That's a big deal." Gene Barr, president and CEO of the Pennsylvania Chamber, said members are not pushing for the bill, even though they're concerned about taxes. "They know the solution is not putting an even heavier burden on the workforce and giving a certain class a really big break," he said. The latest version of the bill, introduced in 2015, proposed expanding the sales tax to goods such as most food, personal hygiene products including diapers, and services such as day care, nursing care and legal, tax and financial consulting. Costly resources would be spent figuring out how to comply with the sales tax expansion, Berdahl said. And more tax complexity is the last thing the still-brittle economy needs right now, he added. Marrara, of the Pennsylvania Manufacturers Association, said an expansion of the sales tax could also promote tax pyramiding, in which goods and services are taxed multiple times on their way to the consumer. "I wish this was a magic bullet, but it just isn't," he said. "This would make it even more challenging to attract businesses to Pennsylvania." Read the original article here.