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FOR IMMEDIATE RELEASE |
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State Rep.
David Levdansky |
  
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House passes bill streamlining fragmented tax collection process
Levdansky says Pennsylvania could save millions with county-wide tax collection system
HARRISBURG, June 25 – The Pennsylvania House of Representatives passed a bill (S.B. 1063) that would consolidate the collection of the Earned Income Tax, also known as the wage tax, and net profits tax from 560 to 69 tax collection districts, saving municipalities and school districts millions of dollars in lost revenue.
House Finance Committee Chairman David Levdansky said Pennsylvania has a reputation of having the most fragmented local tax system in the nation, and the bill would simplify the state's inefficient and cumbersome system.
"There is no method to the madness in how we currently collect Earned Income Taxes in Pennsylvania," said Levdansky, D-Allegheny/Washington. "Each jurisdiction has different practices and reporting methods that businesses must conform to. The excessive number of tax collectors also comes with high administrative costs, which increase tax rates. That makes Pennsylvania an unfriendly place to do business and attract jobs.
"The legislation we passed today would overhaul an obsolete system and enact a process by which local taxes would be collected in an efficient and comprehensive manner. Pennsylvania municipalities and school districts are losing millions of dollars in uncollected tax revenue because there is no accountability among the multitude of tax collectors. That is simply unfair to taxpayers and must be changed."
Levdansky said municipalities and school districts lose an estimated $237 million of uncollected Earned Income Tax revenue each year because of the present process and a lack of statewide standards.
"The 2,878 school districts and municipalities that have a wage tax in Pennsylvania presently collect over $2 billion in wage taxes," said Levdansky, who sponsored the House version of the bill. "If this proposal was implemented and those millions of dollars in uncollected taxes were added to the pot, every school district and municipality would likely see a significant increase in its wage tax revenue. That could lead to reductions in property taxes or wage tax rates."
Under the legislation, 69 tax collection districts would be established and each would be served by one appointed tax officer. In each district, a tax collection committee would be formed by appointed delegates from each municipality and school district, and would be responsible for the appointment of a tax collector to collect the Earned Income Tax, also known as the wage tax.
The tax collection districts would have geographic boundaries mirroring the boundaries of each county. Allegheny County would be broken up into four tax collection districts; one district would represent the city of Pittsburgh and the rest of the county divided into three relatively equal districts. Philadelphia County would continue to collect on a city and county-wide basis.
Though the collection would be done on a county-wide basis, Levdansky emphasized the county would not be involved in the process. A third-party tax collector would be chosen by local municipalities and school districts to ensure each locality is fairly represented.
He added that property taxes are a completely separate and distinct issue, and the collection of property taxes would continue as is under this bill. Locally elected property tax collectors would retain their authority to collect local property taxes.
The bill has strong support from organizations representing local government and businesses, including the Greater Pittsburgh Chamber of Commerce, the Pennsylvania State Association of Township Supervisors, the Pennsylvania State Association of Boroughs, the Pennsylvania League of Cities and Municipalities, the National Federation of Independent Businesses and the Pennsylvania Business Council.
The consolidation would apply to income taxes levied after Dec. 31, 2011.
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