Legislation permits Harrisburg to keep Act 47 taxes
A bill introduced this week would allow the City of Harrisburg to keep in place its higher than typical local services tax (normally $52 but currently $156) and its higher than typical resident earned income tax (normally 0.5 percent but currently 1.5 percent), or possibly both, past the time when the city would leave Act 47 distressed status.
As we have written previously, amendments in 2014 addressed the length of time a municipality could remain in distressed status. Right now Harrisburg is in the three-year exit-plan option which means the city would leave in 2021. However, back and forth between city and state officials over the loss of $11 million in annual revenue from the higher than typical levies led to a discussion of options, from home rule to the legislation at hand.
If the legislation is approved and the city elects to continue to levy the taxes, the money is to be dedicated in a complex way toward the city’s trust fund for its retiree health-care liability. The city would be required to file an annual report detailing the amount of revenue and its use. That report would have to be submitted to legislative leadership and specific committees. It is quite likely the reports would be followed up on the same way the required audits of Pittsburgh’s oversight board were.
Finally, the bill would prohibit a non-resident earned income tax (commuter tax) from being levied by Harrisburg (language that applied to Harrisburg when it was in fiscal emergency status would continue).
Making a special exception to keep higher taxes for a municipality no longer in financial distress is not good public policy and would likely open the door for requests from current or future distressed municipalities.