Almost a year ago to the day (Policy Brief Volume 8, Number 65) we asked this question: "who has the power to set tax rates in a home rule community?" The issue at hand was whether a citizen-led petition drive to lower the rate of the County’s newly-enacted tax on alcoholic drinks could be put on the ballot. The Elections Board, Court of Common Pleas, Commonwealth Court, and, just last week, the Supreme Court of Pennsylvania have all ruled that the governing body—County Council—has the sole power to determine tax rates per the state’s Home Rule Law of 1972.
In retrospect it should not come as much of a surprise that the decision went this way. Pennsylvania has limited and rare referenda. As the Supreme Court pointed out in its ruling, "governance by referenda is a relatively rare occurrence in Pennsylvania, where we hold strong to the ideals of representative democracy and have no general constitutional provision for voter initiative or referenda". There are laws that allow votes on taxes related to libraries, open space, and special taxes in boroughs and townships, along with items like debt authorizations, prohibiting horse racing tracks, etc., but voters in Pennsylvania have very little opportunity to dictate to elected officials how high tax rates can be.
This unfortunate set of circumstances prompts a rephrasing of our question from twelve months ago, to wit, "who should have the power to set tax rates in a home rule community?" Answering this question goes a long way to determining where sovereignty resides in a home rule charter community. One would think it should rest with the voters. After all, in Allegheny County voters approved the Charter, eliminated the County Commissioners, approved a consolidation of row offices, and even turned down a provision that would have allowed County Council members to seek other elective offices without first resigning their seat as required in the original Charter.
But state law does not allow voters to petition or have their say on all issues they might want to effect. There are criteria that must be followed, such as the number of signatures, the relevance of the issue to County government, the number of subjects to be included in the referendum question, etc. And there are subjects (eminent domain, public schools, punishment for felonies and misdemeanors, and others) that by state law are off limits to initiative and referendum.
We now know as a result of the drink tax referendum case that tax rates have been added to the list of off limit subjects with the Council having sole power to set tax rates. This is interesting and somewhat contradictory since the Charter places stringent limitations on the Council regarding property tax rates, the RAD tax, and the hotel taxes. Moreover, the Charter contains language that requires a two-thirds, supermajority vote of Council to raise property taxes. Allegheny County voters put these constraints in place when they approved the Home Rule Charter. All this makes clear that the Legislature has been of two minds about the power of the Council to set tax rates. Perhaps it’s time to sort out the confusion.
According to the Governor’s Center for Local Government Services, 54 of the state’s 71 home rule charters (76%) contain initiative and referendum language. It would seem that a reasonable protection for taxpayers in these communities would be to empower them to propose tax rate questions for referenda. If not, home rule provides very limited autonomy and independence from state law. Elected officials in home rule communities have sole power to enact or raise taxes on residents. Voters and taxpayers should have a reasonable counter-balance against this power.
Therefore, it is time to revise the language of the Home Rule Law that vests all the power for setting tax rates in the governing body to place more tax rate setting power in the hands of citizens.
As we suggested previously, such language could read "IN HOME RULE COMMUNITIES WHEREIN THE POWER OF INITIATIVE AND REFERENDUM IS ADOPTED IN THE HOME RULE CHARTER, IMPOSITION OF NEW TAXES OR CHANGE OF RATES OF TAXATION MAY BE ENACTED BY THE GOVERNING BODY OR THROUGH VOTER INITIATIVE AND REFERENDUM. ANY TAX RATE CHANGE APPROVED BY A VOTER REFERENDUM SHALL NOT BE SUBJECT TO REVISION BY THE GOVERNING BODY FOR A PERIOD OF TWO YEARS".
This proposed revision would go a long way toward giving the people in home rule communities power to limit the size of government. Bear in mind that voters in Allegheny County might be able to go to the ballot box in 2010 to decide whether the Sheriff ought to be an appointed official. While this is important, it in no way approaches the importance of voters having the power to set tax rates and thereby limit the growth of spending.
And while this revision would go a long way to empower home rule communities, ideally all new taxes and tax rate increases in all communities—home rule or not—should be subject to voter referendum.
Eric Montarti, Senior Policy Analyst Jake Haulk, Ph.D., President
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