Senate passes bill consolidating local income tax collections with counties
The state Senate recently approved a bill that would consolidate local earned income tax collections into county-based systems for most municipalities and local school districts. The legislation passed by a vote of 41-8, those who voted against the measure also supported amendments during floor votes that would have allowed more municipalities and counties to opt out of a county-based tax collection system.
SB 1063 sponsor Senator Jane Earll, (R-Erie), said the way we collect taxes now is antiquated, inefficient and results in a lack of withholding, lost revenue and revenue that ultimately does not get distributed to the venues, to the municipalities, where it belongs.
Pennsylvania has 560 local tax collectors who collect and distribute $1.9 billion in local earned income taxes (EIT). These tax collectors operate differently and have territories that don’t always follow local government boundary lines. In some instances, a business may be required to remit withheld taxes to one collector for the school district and another for the municipality in which it is located.
The current system is especially confusing for businesses with multiple locations that are required to file forms with a number of collectors. But even businesses with one location that have employees living in different municipalities suffer under the system.
The Pennsylvania Economy League’s IssuesPA website reports that 235 municipalities use a different tax collector than the school district in which they are located. DCED’s Governor’s Center for Local Government Services estimates that the local governments and school districts are losing $237 million/year in uncollected taxes due to the confusion, bad recordkeeping, poorly trained collectors, and uneven enforcement. It’s a fiscal problem for local governments and an administrative cost to businesses.