The Status of the Earned Income Tax Increase: It Looks Like It’s Imminent
Harrisburg City Council has agreed to put the Earned Income Tax increase to vote.
On Saturday, October 13th, a public notice was posted declaring that “it is the intention of the City of Harrisburg to impose a temporary, 12 month rate increase of the Earned Income and Net Profits Tax (EIT).”
It’s been over a month since last we heard anything about the increase of the EIT. On September 6th, Commonwealth Court Judge Bonnie Brigance Leadbetter held a phone conference with counsel and a consensus was reached—City Council, the Receiver, and the Mayor jointly agreed to ask the Court for time to talk. The parties wanted to attempt to work out a solution on their own.
Originally, in August the Court had ordered City Council to raise the EIT. As the September 11th deadline for City Council to follow orders approached, a public hearing and vote were scheduled. However, there were murmurings that some City Councilors were so adamant about not following the directive to raise taxes on residents that they were willing to refuse the Judge’s order and be held in contempt of Court. Alas, we never saw if it would get to that because the September 6th conversation happened and the parties went behind closed doors to discuss the options.
Mum’s been the word since then. Despite media inquiries about what’s going on, no one has divulged how the talks were going. Not City Councilors, not the Receiver, not the Mayor.
Well, the Mayor kind of did say something after the State of the City address last Friday. When asked about the status of the EIT talks, Harrisburg’s Mayor Linda Thompson said, “There was some expectations for Council to make a decision at this past City Council meeting; they didn’t do it.”
That comment combined with the public notice of the City’s intention to temporarily levy the tax increase indicates that decisions have been made. It looks like for 12 months, the residents of the City of Harrisburg will pay an extra 1% EIT. The notice reads:
This temporary tax rate increase is necessary to pay for costs associated with providing police, fire, emergency, sanitation and other services within the City as well as to partially reduce a current and projected ongoing deficit in City revenue during the next 12 months of a declared fiscal emergency. The proposed local earned income and net profits tax rate increase will generate approximately $5,145,000 in revenue to manage a portion of these costs.
It has been the Receiver Team’s position that there’s just no way around it. Former Receiver Unkovic believed this, hence the reason he put it as part of his plan. The current Receiver Lynch believes it must be done, hence the reason he petitioned the Court for Writ of Mandamus to make City Council do it. The Office of the Receiver maintains that raising the EIT on City residents is not only necessary to help close the City’s structural deficit, but also because in order for the City to eventually use the tool of bankruptcy effectively, it must show that it did everything it could to right its own house. The logic is that the City of Harrisburg won’t be able to get balking creditors to concede if it doesn’t have the increased EIT in hand. This is especially significant should push come to shove and the City is forced into bankruptcy court before a judge who will ask if Harrisburg followed its plan of recovery, fully.
Of course, City residents argue that it’s not just about the fact that the EIT is being raised. It’s about the fact that the EIT is being raised exclusively on residents and not on those who work in the City, but don’t live here. A “commuter tax” common to other Act 47 cities has always been denied to Harrisburg. And this is the sore spot for many people. That, though, is not within the jurisdiction of the Receiver Team. They just follow the law that the State’s legislators enacted. If the EIT will be increased, it will be increased only on those living in the City. Just as Representative Glen Grell wrote it.
The vote is scheduled for October 23rd, 6:00pm, City Council Chambers, City Hall. While all signs seem to be pointing at the fact that this is a decision decided, it won’t be until then that we know exactly what City Councilors have agreed to do on this matter.
- 9/7/2012: EIT Increase Put On Hold
- 8/27/2012: The Order: Commonwealth Court Judges Rules for 1% Earned Income Tax Increase on City Residents
- 8/27/2012: HBG City Councilor’s Statement on Judge’s Order to City Council
- 8/06/2012: It’s About Money: The City Versus The State
- 7/21/2012: Stated Power Procured
- 7/10/2012: The Office of the Receiver Petitions Commonwealth Court