McKean County residents will soon experience additional changes
to the way the occupational privilege tax is deducted from their
paychecks.

The tariff, which has been renamed the Local Services Tax, will
be incrementally deducted from checks throughout the year instead
of in one lump sum at the start of each year. It also exempts
anyone earning less than $12,000 annually from being subject to the
tax.

The legislation instituting the changes – Senate Bill 157 – was
passed in both the Senate and House and will go into effect
immediately and apply to local services taxes collected in
2007.

As it stands, most municipalities across the region have raised
the tax from $10 to $52, supplying extra funds for police and
emergency services, road construction and property tax
reduction.

“I don’t believe in penalizing somebody for working in a
municipality,” state Rep. Martin Causer, R-Turtlepoint, said on
Monday. “But, this is a step in the right direction to help make it
not so much of a burden to people.”

Causer, who voted against the original legislation introduced in
2004 – House Bill 197 or the Emergency and Municipal Services Tax –
said he supports the revised bill because it makes paying the tax
easier for working people.

“While it’s still an issue, it makes it a little easier for
people to deal with,” Causer said, adding lawmakers have been
working for the past two years to make changes to the original
legislation. “To take it ($52) all out at once is a hardship to
people.”

Among those changes include the way the tax is taken out of
paychecks. Officials said if a person works in a municipality that
is at the $52 threshold, then $1 will be deducted each week under
the new taxing structure.

Meanwhile, anybody earning less than $12,000 a year is
automatically exempt from paying the tax, no matter what
municipality they work in.

“Take somebody working in a fast food restaurant,” Causer said.
“To take $52 out of their first paycheck of the year … that’s a
pretty huge chunk.”

Officials have also expressed concern about students and
seasonal workers who often only work during the summer and were
subject to the tax. Employers have also struggled with finding a
way to fairly and accurately collect the tax.

State Sen. Joe Scarnati, R-Brockway, who also voted against the
original measure, said most municipalities automatically went up to
the $52 threshold when allowed to.

“I welcome the changes,” Scarnati said, noting lower income
workers weren’t excluded from the original package. “But this is
still a tax. I guess changing the name was part of the way to maybe
make people feel better about it.”

Indeed, the name of the tax has been changed three times –
leading to some heartache for local municipalities which have to go
back through and rewrite and vote on ordinances regarding the
legislation. Officials said the change in names was done to clarify
its purpose.

“We are going to be doing some ordinance changes,” Bradford City
Clerk John Peterson said, adding the city had already passed the
$12,000 and under portion of the legislation two years ago. “The
change in pay period deductions will probably be the biggest
adjustment for people. There really aren’t any major changes for
us. It’s probably better for an employer or employee at this
point.”

In addition to the two major changes in the bill, language also
clarifies the definition of income. Officials said for the purpose
of qualifying for an exemption, “income from all sources” will be
considered, including all earned income and net profits.
Additionally, the responsibility of investigating exemptions will
belong to the levying municipalities or school districts, not the
employer.

Meanwhile, the municipality in which an employee primarily works
has first priority to the funding from the tax; in situations of
multiple employment, second and third priorities are designated to
where the person resides and works and where the individual is
employed closest to his or her place of residence.

Officials said municipalities that used 25 percent or more of
their Emergency Services Tax revenue to fund property tax
reductions in 2005 or 2006 will not be required to apply the
low-income exemption until 2008.

Causer said the emergency services moniker presented problems in
some portions of the state with fundraising for emergency medical
groups, which rely on residents for financial support. Officials
said the name change will signal that not all the money is going
for emergency services.

The occupational privilege tax was established in 1965 and is
withheld from the paychecks of individuals working in a certain
municipality.