Two state House members who recently filed a bill to create more flexibility in local taxation cited the city of Lancaster to make their case, but they could have chosen just about any small- or mid-sized local government.
As the Pennsylvania Economy League has pointed out for years, state restrictions on local government taxation options drive up local property taxes, help to reduce city populations without diminishing their service burdens, and make cities more difficult to govern.
The bill filed by Democratic Reps. Dave Madsen of Dauphin County and Ismail Smith-Wade-El of Lancaster County, would:
n Eliminate caps on earned income taxes in townships, boroughs and third-class cities.
n Allow those municipal governments to levy a payroll tax to replace other types of cumbersome business taxes.
n Enable those governments to increase the local services tax to $82 from $52 and index it to inflation.
Scranton, the state’s only Class 2-A city, is a good example why local taxation flexibility is necessary. The government officially was “distressed” under state law from 1992 to 2022, for a variety of reasons. Without state permission to maintain a $156 local services tax, three times the $52 cap that applies to third-class cities, Scranton might not have been able to exit the state recovery program.
The tax is assessed not just on Scrantonians, but on everyone who works in the city. It is, in effect, a bit of a backdoor commuter tax, albeit a modest one and a fair means to help the city cope with the service burden that attends a swollen workday population.
Many people who enjoy municipal services also abhor taxes. The objective should be to craft those taxes specifically to each community’s situation. The current one-size-fits-all structure does not fit all.
The PEL advocates some of the measures in the new bill, along with giving municipal governments options including taxes on alcoholic drinks, indexing flat municipal fees to inflation, modernizing business taxes, and others.
Local residents need not fear such flexibility because any taxes likely would be in lieu of property tax increases and, after all, the politicians building the tax structure have to fear local voters.
— The Citizens’ Voice, Wilkes-Barre via TNS
