TOWANDA - Voters who live in the Towanda Area School District will be asked on Tuesday to approve a change in the way they are taxed by the school district.

A question on the Nov. 6 ballot asks voters if 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.

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

Secor and Towanda School Board members have criticized the occupation tax as unfair.

That's because the size of the occupation tax that you pay is determined by which of three job categories your job is assigned to, regardless of how much you actually earn, Secor said.

Therefore, a person who earns $20,000 would pay the same occupation tax as someone who earns $120,000, if their professions were in the same job category, she has said.

Secor has said the unfairness of the tax hits people with lower incomes.

If the ballot question passes, some people will pay more in overall taxes than they do now, while others will pay less, Secor said.

Specifically, Secor said that people with low incomes will pay less in overall taxes than they do now, while people with high incomes will pay more in overall taxes than they do now.

Another problem with the occupation tax is that a lot of people aren't paying it who should be paying it, Secor has said.

"There are many school district residents who are not on the (occupation tax) assessment rolls. Therefore, they are not paying the occupation tax," according to a press release from the Towanda School District. "The occupation tax roll is very difficult to maintain" because few municipalities have assessors, the press release said.

The ballot question only affects people who are working, since they are the only people who pay the occupation tax or the local earned income tax, Secor said.

The local earned income tax is not levied on "passive income," such as interest and dividends, Secor said. The local earned income tax is not levied on retirement benefits, either, Secor said.

The local earned income tax taxes wages and net profits, she said.

School Board members have said they'd like to see the ballot question passed.

Compared to the occupation tax, the local earned income tax "is a much fairer way to tax," said school board member Peggi Munkittrick.

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.

Under state law, if the ballot question is passed, the school district would not be allowed to reinstate the occupation tax in the future, Secor said.

The same referendum question has appeared on the ballot twice in the past in the Towanda Area School District, and was voted down both times.

The exact wording of the question that will appear on Tuesday's ballot is: "Do you favor eliminating the occupation tax by increasing the rate of the Towanda Area School District earned income tax from .50 percent to a new School District maximum tax rate of .74 percent and a maximum new tax rate together with municipalities of 1.24 percent effective July 1, 2013?"

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