Harrisburg

10-year extension of additional taxing authority for Harrisburg is included in Pa. fiscal code invoice. – PennLive

This story was updated at 5:57 p.m., to note that the provision under consideration would also authorize a permanent extension of Harrisburg’s 2 percent earned income tax on city residents.

A provision in the proposed state Fiscal Code would extend extra taxing authority to the City of Harrisburg for more than a decade, in an effort to help the city continue to pull away from the budget issues that threatened to plunge it into bankruptcy several years ago.

The provision would extend Harrisburg’s ability to levy an enhanced Local Services Tax on all people who work in the city for 15 years: the first 10 years at $3-per-week, or $156; and for the next five years after that, not to exceed $2-per-week, or $104. After that, it would revert to the same $1-per-week rate that generally applies statewide.

It would also permit the city to retain its 2 percent local wage tax on city residents.

The eventual phase-out of the taxes has been a concern for Mayor Eric Papenfuse’s administration for some time. The enhanced taxing authority means about $12.4 million in revenue annually for the city.

The enhanced tax rates are currently in place through 2023 under a five-year extension passed in late 2018, but city officials have been seeking a longer-term extension to allow them get into the market to refinance existing debt at lower rates of interest, something that Papenfuse has said could save the city millions of dollars annually.

With a drop in the tax revenues in the near-term horizon, the city might miss out on historically low rates.

The new provision would allow the city to keep the local service tax at elevated rates through 2035, while the elevated income tax has no sunset date.

Many municipalities across the state levy the local services tax. But for the vast majority, it is capped at one dollar per week. Harrisburg got the authorization to go higher with its levy as part of the city’s financial recovery plan coming out of the incinerator-related debt crisis.

One aspect of the local services tax that municipal officials like is that it puts a share of the costs of city services on the tens of thousands of out-of-towners who work here during the week. At the time the enhanced local services tax was imposed, studies showed that it would apply to about 36,000 non-residents, and less than 7,000 city residents.

People who earn less than $24,500 annually are exempt from the tax in Harrisburg.

As part of the 2018 compromise, as long as the local services tax enhancement is in place, the city is barred from imposing any other tax on the earned income of non-residents. A tax like that could be even more costly for some state workers and others who commute to Harrisburg, potentially costing them up to 1 percent of their salary, depending on the current local wage tax rates in their home municipality.

The prohibition would also continue in the new extension.

Papenfuse declined comment on the Harrisburg provisions Friday, saying he wanted to wait until after legislative action.

The fiscal code passed the state Senate Friday afternoon on a 33-16 vote. It now awaits final action in the state House of Representatives.

David Black, president and CEO of the Harrisburg Regional Chamber, said the local services tax extension may irritate individual commuters, and he said he wished that he and other regional business leaders had been consulted on the proposed change before hearing that it had already been inserted in a bill.

But that aside, Black said the enhanced rate does seem to be necessary for city operations, especially in a city like Harrisburg where so much institutional property is exempt from local property taxes, and “I don’t think anybody finds it overly objectionable.”

Black he has not aware of any businesses making a siting decision because of this tax.

The Harrisburg tax provisions were added to the fiscal code bill in the Senate Appropriations Committee Friday afternoon. Senate Majority Leader Jake Corman’s new chief of staff, Krystjan Callahan, had been working until earlier this year as a lobbyist for the firm the Papenfuse Administration has hired to represent the city’s interests at the Capitol, Maverick Strategies.

Callahan ended his association with the firm in September, when he joined Corman’s staff.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *