Gov. Tom Wolf holds his first press conference

Pa. Gov. Tom Wolf is expected to take a stab at school property taxes - through higher state taxes - when he introduces his first budget next week. Mark Pynes | mpynes@pennlive.com

(Mark Pynes | PennLive, file)

With campaign promises solidifying into governing plans at this writing, Gov. Tom Wolf appears to be ready to join a long line of Pennsylvania governors who have tried to significantly reduce property taxes.

Multiple sources told PennLive this week they expect Wolf's "tax fairness" plan to include a major slash at residential school property tax bills, in keeping with his larger goal of shifting more education costs to state government.

The plan, while not eliminating property taxes altogether as some lawmakers would like, would add to the small breaks currently derived from former Gov. Ed Rendell's legalization of casino gambling, sources said.

Here's the anticipated trade-off:

Any new property tax cuts would come as part of a larger overall set of tax increases that would include Wolf's previously proposed tax on natural gas production plus major hikes in the state's current 3.07 percent personal income tax, its 6 percent sales tax, or both.

Wolf is also expected to propose an increase in the state's cigarette tax, as well as various business tax changes.

That litany has already prompted Senate President Pro Tempore Joe Scarnati, R-Jefferson County, to warn Pennsylvanians Monday of "massive" tax increases in Wolf's forthcoming plan, which will be unveiled March 3.

But while overall taxes in Wolf's proposal may increase, the governor-as-candidate has argued that his reforms - including a new standard exemption for the personal income tax - are designed to lower tax bills for middle- and lower-income households.

Wolf declined to discuss specifics of his budget plan at a public appearance in Dauphin County Tuesday.

But he did remind reporters that "what I talked about (during the campaign) was a fairer tax system. And so I do intend to present that.

"This is a chance for a reset (on taxes)." Wolf continued. "And I hope the people of Pennsylvania like what I propose."

That's never a sure thing with the property tax issue, which governors and lawmakers have struggled with for decades.

Many activists on the issue want total elimination of a tax they believe is patently unfair. Some school entities, meanwhile, like having it as part of the mix because it can be a stable source of revenue in down economic cycles.

Still others - including some leading business groups - see a shift to sales or income taxes as worse.

The plan Wolf is said to be preparing, according to lobbyists, legislative sources and education stakeholders who all are tracking the issue but asked for anonymity in discussing closely-held details, tries to thread the needle like this:

Money earmarked for reductions would flow back to school districts by formula, just like the state gaming tax being collected now to discount school property taxes assessed on primary residences or farms.

In some limited cases, money being returned under Wolf's amped-up plan could cover a school district's entire residential property tax bill - effectively zeroing out bills for most homeowners in those communities, sources said.

Those school districts would be required to use any leftover distributions to reduce real estate millage rates for the owners of business and commercial properties that are still paying the tax.

To school districts, the plan would have the effect of shifting some current costs to Harrisburg, even as other state funds are added to grow Pennsylvania's overall investment in basic education, sources said.

Supporters of the effort note that House Majority Leader David Reed, R-Indiana County, sponsored a similar plan last year.

Reed's plan strived to raise $4 billion, which he said was enough to take state coverage of public school costs from the current 35 percent to 50 percent. Wolf has also promised to work toward the 50 percent funding threshold.

Reed's bill, which never received a vote in the state House, raised the money by taking the current personal income tax rate from 3.07 percent to 3.7 percent and boosting the state sales tax from 6 to 7 percent.

It was not clear Tuesday if the rates to support Wolf's plan, which some sources said could also include the elimination of some existing exemptions from the sales tax, have been finalized yet.

When asked about a pending property tax proposal Tuesday night, Wolf's Press Secretary Jeff Sheridan said only that "Governor Wolf has been clear that he believes the state needs to increase its share of education funding to lower the burden placed on middle-class families by rising property taxes."

Critics of Wolf's anticipated approach cautioned that any comparison to Reed's bill is valid only to a point: the first-year House leader's plan dedicated every new dollar produced by those tax increases to property tax cuts.

Wolf's plan, according to those familiar with its emerging terms, would use only a portion of new taxes raised to offset property taxes.

"He wants some property taxes and some new spending," Rep. Seth Grove, R-Dover Twp., noted. "I don't think the General Assembly is interested in that at all."

If Wolf goes down this path, many Pennsylvanians may be in for a case of sticker shock. Because this paradigm shift in school funding will, by definition, add billions of dollars of cost to state spending.

And the governor will have to show extreme dedication to his message, because if multiple state tax rates do in fact go up, that's a noisy narrative in itself.

Still, many will welcome the debate.

Sen. Mario Scavello, R-Monroe County, got a bill through the state House in 2005 that raised state personal income taxes by a quarter of a percentage point and boosted the state's sales tax rate to 6.5 percent to achieve an average 35 percent cut in school property taxes.

Scavello said Tuesday he now prefers the idea of total property tax elimination, but is willing to look at anything that helps Pennsylvanians stay in their homes.

Ultimately, Scavello said, his support will hinge greatly on how dollars raised by the state to offset local property taxes are distributed to the 500 school districts.

Grove, no stranger to the property tax reform debate in past legislative sessions, said Tuesday he won't be surprised if some form of property tax reduction makes Wolf's budget proposal.

The governor had dropped into his office earlier this winter, Grove recalled, as he was preparing for a town hall meeting.

Grove said that when he explained to Wolf that he usually gets a lot of property tax questions from constituents, Wolf's reply was: "Remember that. Property taxes."

"So I assumed that he will have property taxes in his speech," Grove said. "At least he's bringing it up."