Credit: Tom Sofield/NewtownPANow.com
The Pennsylvania Senate has passed the Commuter Tax Fairness Act, which the lawmaker behind it says aims to make Philadelphia’s City Wage Tax more equitable for nonresidents and help municipalities outside of the city.
State Sen. Frank Farry, a Republican from Langhorne Borough, and State Sen. Steve Santarsiero, a Democrat from Lower Makefield Township, both voted in favor of the bill Wednesday that passed the state senate 28-21.
Under the current system, non-residents working for a Philadelphia-based employer are required to pay the full 3.44 percent City Wage Tax, regardless of whether they physically work in the city or not. The Commuter Tax Fairness Act, which was introduced by Farry, would allow 1 percent of the tax to be remitted to the workers’ home municipalities for towns that have an earned income tax, while maintaining the 3.44 percent tax rate.
According to Farry, this new system would keep a fair share of tax dollars local and reduce the tax burden for non-Philadelphia workers of surrounding municipalities who are currently paying all of their local income tax to the city, rather than to their home municipality.
“As a former municipal official, I know how difficult the financial challenges are for local governments and first responders. Because of Philadelphia’s City Wage Tax, millions of dollars are diverted from the municipalities where our residents live – resulting in higher taxes for basic services like fire, police and emergency medical services,” Farry said.
The Commuter Tax Fairness Act would bring Philadelphia in line with over 2,500 other local governments that reimburse earned income tax revenues collected from non-residents to their home municipalities, according to Farry.
“While every other municipality in the Commonwealth must reimburse earned income tax revenues collected from non-residents to the home municipalities of those non-residents, Philadelphia is alone in its ability to keep for itself, both the earned income tax of its residents and all of the non-residents who work in the city, without having to remit any portion or percentage of those non-resident revenues back to the home municipality of those non-residents,” said Bensalem Township Mayor Joseph DiGirolamo.
In March, municipal officials testified before a senate committee that met in Middletown Township to discuss how the Sterling Act of 1932 allows Philadelphia special taxing privileges that takes money away from suburban communities.
Credit: PA Internet News Service
Municipal officials said the system is unfair as doesn’t allow them to collect earned income tax revenue from residents that maintain local services.
It is estimated that Bucks County municipalities lose close to $10 million in EIT revenue to the city and school districts lose millions more, according to data from Keystone Collection Group, which is a contractor many towns use to collect taxes.
Combined, Newtown Borough, Newtown Township, Upper Makefield Township, and Wrightstown Township lose more than $667,000 in potential tax revenue to the city annually. The Council Rock School District loses more than a $1 million each year.
The Bucks County Association of Township Officials has data showing at least 20,377 people from nearly every town in the county pay the city wage tax.
Rob Dubow, the Philadelphia finance director, said earlier this year that the approval of the Commuter Tax Fairness Act would cost the city $190 million in wage tax revenue each year.
The bill will now be considered by the Pennsylvania House of Representatives.
