Harrisburg–the City–sees a problem brewing. It is currently in Act 47 distressed status: while it is there, like most other Act 47 municipalities, it gets special taxing power while in Act 47. The hope is that once financial shortcomings are fixed, the municipality exits, and it should not return. Along with its exit goes any special taxing power it once had. This has happened for the 11 municipalities who have left Act 47 to date.
But Harrisburg is governed by the Third Class City Code under an optional plan (adopted prior to the state Constitutional provisions for home rule, according to its recovery plan), and that code describes the limits for taxation and the subjects a City of the Third Class can tax. So what do some officials see as a possible solution? See if the City can adopt a Home Rule Charter and thus it would be free of the Third Class City limitations. If not, it sees itself in receivership under the provisions of the amended Act 47.
According to the City’s recovery plan, the 1.5% earned income tax levied by the City on its residents is divided thusly: 1% comes from being in Act 47, 0.5% is the amount the City can levy subject to Act 511. The 1% would go away on the exit from distressed status (a $7 million decrease on $10 million collected now). So proponents see Home Rule as a way to possibly maintain the tax.
Perhaps. But it is possible that a home rule study commission could place supermajority requirements on tax increases by the City’s governing body; or it could mandate a spending cap; or it could embolden the residents of the City to propose outsourcing and/or privatization to garner savings.
The DCED publication on home rule notes that a home rule municipality cannot change the subjects of taxation and it cannot alter restrictions on non-resident taxation. It possesses no limit on the rate of taxation on residents. A 2011 Brief noted some of the higher that 0.5% municipal rates in Allegheny County, either due to home rule or Act 47 status.
The City of Clairton in Allegheny County entered Act 47 in 1998, adopted a home rule charter in 1990, and exited Act 47 last year. Its rescission report shows that it bumped up residential and non-residential wage tax rates in 1989; it eliminated the wage tax on non-residents levied under Act 47 in 2001; eliminated the extra amount on residents in 2007; then levied a 0.5% additional on residents in 2010 under its Charter. As of 2015, a Clairton resident pays 1.5% in wage tax–1% to the municipality, 0.5% to the school district.
