Tuesday, October 24, 2006
A Confusing Tax Becomes More So
Only in Pennsylvania would the General Assembly pass a tax, fix its shortcomings through amendments, and then let the second largest City continue to abuse the worst part of the law for just a little while longer.
The state had long permitted municipalities to levy a tax on people who worked within the municipality’s boundaries, regardless of where they lived. The rate was $10 and it was called the Occupational Privilege Tax. Responding to calls from municipalities, particularly the City of Pittsburgh, who claimed that the tax was too low and not adjusting to inflationary growth, the state allowed the tax rate to grow to no more than $52 annually. It was renamed the Emergency and Municipal Services Tax, and municipalities were allowed to exempt those making less than $12,000 a year.
The complaints started soon thereafter: low-wage earners did not like the fact that the $52 came out all at once at the beginning of the year like a perverse New Year’s gift; ambulance services were complaining that taxpayers thought the tax was going to benefit the ambulance companies, which was not the case; and those who were able to get refunds were still liable for the old $10 tax since the new legislation did not eliminate the old $10 tax liability.
Now the state Senate has passed legislation to make the following changes: the tax will be collected quarterly instead of all at once; the permitted use for the tax revenues are outlined and expanded to include homestead and farmstead property relief; and the tax will be re-branded as the “local services tax”.
Pittsburgh has received a gift from the state if the House passes the bill and the Governor signs it in that they won’t have to change the collection status until 2010. The City is afforded special treatment that no other city in the state, even those in distressed status, will receive. Proponents said that Pittsburgh is counting on the money up front in the beginning of the year and the change would cost them. In clearer terms, the preferential treatment is allowing Pittsburgh to obtain money that they are not entitled to because it is known that many workers, particularly low-wage earners, won’t take the time to fight for their refund at the end of the year. The 2007 budget put collections at $9.1 million, down from $14.5 million in 2006. Now it looks like the City can put the money it would not be entitled to back in.
Let’s hope City officials remember this episode should they ask for new or expanded taxes in the future.
The state had long permitted municipalities to levy a tax on people who worked within the municipality’s boundaries, regardless of where they lived. The rate was $10 and it was called the Occupational Privilege Tax. Responding to calls from municipalities, particularly the City of Pittsburgh, who claimed that the tax was too low and not adjusting to inflationary growth, the state allowed the tax rate to grow to no more than $52 annually. It was renamed the Emergency and Municipal Services Tax, and municipalities were allowed to exempt those making less than $12,000 a year.
The complaints started soon thereafter: low-wage earners did not like the fact that the $52 came out all at once at the beginning of the year like a perverse New Year’s gift; ambulance services were complaining that taxpayers thought the tax was going to benefit the ambulance companies, which was not the case; and those who were able to get refunds were still liable for the old $10 tax since the new legislation did not eliminate the old $10 tax liability.
Now the state Senate has passed legislation to make the following changes: the tax will be collected quarterly instead of all at once; the permitted use for the tax revenues are outlined and expanded to include homestead and farmstead property relief; and the tax will be re-branded as the “local services tax”.
Pittsburgh has received a gift from the state if the House passes the bill and the Governor signs it in that they won’t have to change the collection status until 2010. The City is afforded special treatment that no other city in the state, even those in distressed status, will receive. Proponents said that Pittsburgh is counting on the money up front in the beginning of the year and the change would cost them. In clearer terms, the preferential treatment is allowing Pittsburgh to obtain money that they are not entitled to because it is known that many workers, particularly low-wage earners, won’t take the time to fight for their refund at the end of the year. The 2007 budget put collections at $9.1 million, down from $14.5 million in 2006. Now it looks like the City can put the money it would not be entitled to back in.
Let’s hope City officials remember this episode should they ask for new or expanded taxes in the future.
