State is changing how towns, school districts collect earned income taxes
Pennsylvania is changing how municipalities and school districts collect earned income taxes, a tax levied against a person's earned income or net profit.
Under Act 32 of 2008, which amends the Local Tax Enabling Act, counties are now required to form a countywide collection committee and delegate one tax collector who will be responsible for the collection of earned income tax. Act 32 takes effect in 2012.
Also under the new law, it is the responsibility of the county commissioners to call to order the first meeting of the municipalities and school districts in the tax collection district by Nov. 15. This meeting is for the purpose of electing delegates, as well as organizing committees to handle the needs of the county.
In Carbon County, the meeting is slated for 7 p.m., Oct. 27, in courtroom 1 in the Carbon County Courthouse, 4 Broadway, Jim Thorpe.
Commissioner William O'Gurek, chairman, who will conduct the meeting, explained the county will have a limited role in the process, conducting only the inaugural meeting.
He added that the actions of the new committee are "determined by a majority vote of the delegates present and voting, although the voting power of all delegates is not necessarily equal. The voting power of each delegate is weighted based on a combination of the amount of revenue the represented taxing entity collects and that taxing entity's population, in proportion to the revenues collected and populations of all represented entities."
For example, Jim Thorpe borough has an earned income tax revenue of $441,980 and has 4,804 residents. That means, based on those two factors, the town's weighted vote is 4.33 percent.
After the committee has elected a chairman at the inaugural meeting, officials from the county district, which includes Jim Thorpe, Kidder Township, Penn Forest Township, East Penn Township, Franklin Township, Lehighton, Mahoning Township, Parryville, Weissport, Bowmanstown, Lower Towamensing Township, Palmerton, Towamensing Township, Lansford, Nesquehoning, Summit Hill, Coaldale, East Side, Lausanne Township, Lehigh Township, Packer Township, and Weatherly; as well as Jim Thorpe, Lehighton, Palmerton, Panther Valley and Weatherly school districts, will have the responsibility to create committees and determine who the earned income tax collector will be.
Attorney William Schwab, solicitor for Lehighton Area School District and an East Penn Township supervisor, said this change is new to everyone and an informal meeting is scheduled to prepare the school districts and municipalities for the upcoming inaugural meeting.
This informal meeting, which Schwab said is open to officials of school districts and municipalities, is scheduled for 9 a.m., on Oct. 19, at the Jim Thorpe Area School District administrative offices.
Schwab said the purpose of this meeting is to prepare topics that should be further discussed once a chairman for the committee has been elected.
Schwab also raised some concerns that the school districts, as well as some of the municipalities have about the new law.
"The Pennsylvania School Board Association is concerned about the whole project," he said. "The tax revenue from the earned income tax is about 50 percent. If there is any delay (in distributing the funds), then that will affect the functions of the school districts and the boroughs and townships. Many of us are scared. What happens if we don't get earned income tax for two months?"
He noted that many municipalities and school districts depend on the earned income tax to cover operating costs.
Once the committee is formed, it will take the district an estimated $10,000 to cover start-up costs.
Schwab said the five school districts have discussed advancing the committee the $10,000 so the burden is not placed on everyone's shoulders. This decision has not been made final and will be discussed at a later time.
More information on Act 32 can be found at www.act32info.com.