LOCAL TAX REFORM -- INTRODUCTION
Posted: 9/20/02
Pa. Act 50 of 1998 (Senate Bill 669) contains the first substantial local tax reform by providing school districts the option of eliminating certain "local nuisance taxes" (e.g., occupation assessment, per capita, residence, and occupational privilege taxes) and, in most cases, a reduction in real estate taxes. The revenue lost from the repeal or reduction of these taxes is replaced by an increase in the school’s earned income tax rate. This new tax option’s first effective date was July 1, 2000. As of July 1, 2002 only 4 school districts in Pennsylvania enacted this option – one of which, the Central Dauphin School District, is a member of the Capital Tax Collection Bureau. This bill also includes provisions for the "Homestead Property Exclusion", and the "Local Taxpayers’ Bill of Rights".
Pa. Act 24 of 2001 (House Bill 550) was created to provide school districts with the option of eliminating their occupation assessment tax and replace it with an increase in their earned income tax rate. This is a substitution of one tax (the earned income tax) for another tax (the occupation assessment tax), and overall is designed to be tax revenue neutral. Some individual taxpayers will end up paying less in local taxes, and some will end up paying more. This new tax option’s first effective date was July 1, 2002. As of July 1, 2002 36 school districts in Pennsylvania enacted this option – five of which, the Big Spring, Carlisle Area, Shippensburg Area, South Middleton and Susquenita School Districts, are members of the Capital Tax Collection Bureau.
Pa. Act 96 of 2002 (House Bill 2126) amended Act 24 (2001) to also provide municipalities with the option of eliminating their occupation assessment tax and replacing it with an increased earned income tax rate. It is anticipated that the impact from this act will be minimal since very few municipalities levy a non-flat rate occupation assessment tax. This new tax option’s first effective date was January 1, 2003.
Links to other helpful information regarding local tax reform are provided below (Adobe Acrobat PDF format):
Information sent to taxpayers with Request/Authorization Form for Increased Local EIT Withholding: