TOWANDA - Residents of the Towanda Area School District who go to the polls in November will be asked to approve a change in the way they are taxed by the school district.

A question on the Nov. 6 ballot will ask voters whether they wish to eliminate the Towanda School District's school occupation tax in exchange for increasing the local earned income tax from 1.0 percent to 1.24 percent.

At its most recent meeting, the Towanda Area School Board voted unanimously to place the referendum on the Nov. 6 ballot.

One of the main problems with the occupation tax is that many people don't pay the tax who should be paying it, according to a press release from the school district.

"There are many school district residents who are not on the assessment rolls. Therefore, they are not paying the occupation tax," the press release states. "The occupation tax roll is very difficult to maintain with few municipalities having assessors."

In addition, the occupation tax is unfair because the tax rate that a resident pays is determined by which of three categories his or her job falls under, rather than the amount of income that that resident earns, the press release says.

"It (the occupation tax) is an unfair tax that taxes a resident's occupation category rather than (the resident's) income level," the press release states. "Residents that are in the same occupation category pay the same flat tax rate regardless of income earned. There could be a range in income levels from $10,000 to $100,000 in any occupation category. Lower income residents pay a higher percentage (of their income) in occupation tax than higher income residents. The proposed increased earned income tax rate will be based on income only."

Raising the local earned income tax from 1.0 percent to 1.24 percent would bring in an equal amount of revenue as the occupation tax has brought in, Towanda School District Business Manager Doreen Secor said.

Currently, residents of the Towanda School District pay a 1.0 percent local earned income tax, with .5 percent going to the school district and the other .5 percent going to the municipality they live in, Secor said.

If the ballot question is passed, the local earned income tax in the Towanda School District will increase to 1.24 percent, with .74 percent going to the school district and the other .5 percent going to the municipality. Secor said.

If the referendum passed, the occupation tax would be eliminated in July 2013, at which time the local earned income tax rate would be increased, Secor said.

In a number of other local school districts, the school occupation tax has been eliminated through similar tax-shift referendums, and Secor said that all of the residents she has spoken to in those school districts have had favorable things to say about the elimination of their school occupation tax. Residents in those school district have said the shift to a higher local earned income tax has taken place "seamlessly," according to Secor.

"I think the biggest thing (for voters to know) is that the occupation tax cannot come back" if the referendum passes, Secor said. Under Act 24, the school board would be barred from reinstating the occupation tax after it is eliminated by the voters in a referendum, Secor said.

"I'm in favor of this (the elimination of the school occupation tax) wholeheartedly," Towanda School Board member Bob Hettich said at the most recent Towanda School Board meeting. However, Hettich said he would like to see a so-called personal income tax created in the school district, rather than relying on the local earned income tax.

Hettich said that a personal income tax would bring in substantially more revenue to the school district than the local earned income tax. The personal income tax taxes, for example, royalties and gas lease money, which the local earned income tax does not.

However, Secor said that under Act 24, the school district is not allowed to convert its occupation tax to a personal income tax.

Under Act 1, there is a mechanism to convert the school district's local earned income tax to a personal income tax, which would require approval from the voters at the polls, but the process for initiating that conversion cannot start until 2013, officials said.

James Loewenstein can be reached at (570) 265-1633; or email: jloewenstein@thedailyreview.com