Recently, the Local Government Academy conducted the 2007 Taxation Update Program, where one of the topics was PA
Senate Bill 1063 and its House companion, Bill 1550. The PA
Senate Finance Committee has unanimously approved the bill, which
consolidates the local collection of earned income tax revenue across the
state. Currently, tax collection is conducted by 560 collectors, and the bill
reduces this number to 66, or one per county. This excludes
Below are two opinions on this bill by Brian K. Jensen, Program Manager, Pennsylvania Economy League of Southwestern Pennsylvania, and Mary L. Abbot, President of Pennsylvania’s Earned Income Tax Officers, Administrators, and Collectors (PEITOAC) and Tax Office Manager of Mount Lebanon, PA. Read these opinions and post your responses!
Brian K. Jensen, Ph.D.
Pennsylvania Economy League of Southwestern Pennsylvania
Phone: (412) 281-4703 ext. 3134
E-mail: [email protected]
It’s human nature to make life easier by consolidating and streamlining processes. Consider our personal choices. We welcome one-stop online bill payment opportunities. And we applaud customer service when one representative can efficiently handle all of our needs without having to pass the call to six other representatives. In business and retail administration, consolidation is considered a good approach when efficiencies are enhanced and dollars are saved. Back-office operations—payroll, purchasing, benefits administration—are often managed with a shared services approach, particularly when multiple branches or locations are involved. Wasted effort is reduced and economies of scale save money. Savings can provide for additional hiring and better benefits for employees and strengthen the businesses’ competitiveness. Consolidation’s benefits are obvious.
Even in matters of tax collection, the benefits of consolidation and streamlining are apparent: having Pennsylvania’s personal income tax withheld from our wages and salaries. If SB 1063 is passed, Pennsylvanians will have the chance to appreciate the same streamlined efficiency in the collection of school district and municipal earned income taxes.
The Pennsylvania Economy League of Southwestern Pennsylvania concludes that businesses and citizens of Pennsylvania will benefit dramatically from the recovery of $237 million in earned income tax revenue that falls through the cracks every year. Such a significant amount of lost annual revenue—money that, if recovered, could result in more teachers in classrooms and police on the streets, or could go towards reduction of other local taxes—merits attention and careful consideration of why consolidation of earned income tax collection can be a win for Pennsylvania employers, taxpayers and local taxing jurisdictions.
If Pennsylvania adopts a consolidated approach to earned income tax collection, tax collection won’t shift from a municipal function to a county function. Pennsylvania’s 560 earned income tax collectors will be streamlined to 66 collectors. This number corresponds with the number of Pennsylvania counties to be affected by the change (Philadelphia is not included as it already has consolidated earned income tax collection). While tax districts would generally align with county boundaries, earned income tax collection will not be a county government function. The process for choosing tax collectors will be a function of tax district committees comprising municipal and school district representatives.
The lack of a complete and coherent paper trail, at this time, contributes to taxes failing to arrive at their intended destinations. Consolidation and standardization will reduce the loss of revenue for countless municipalities and school districts—revenue that is rightly theirs. Consider how one Pennsylvania businessman—frustrated by the cumbersome current earned income collection approach— recently admitted, “Our company has multiple sites across the state, and we don’t withhold for any of our employees—even if we are in a location where withholding is required. It’s just too complicated to go through the process.” Consolidation will make it easier for employers to do the right thing consistently.
Taxes withheld by employers will reach their respective tax districts at least as fast— or faster—than they currently do. Currently, on average, only 15 percent of residents live and work in the same municipality—a percentage which does not offer significant tax revenue impact. Conversely, 69 percent of residents live and work in the same county. Thus, an earned income tax collection system consolidated by county reduces the number of times tax revenue must change hands.
Successes already in place underscore that a state-wide earned income tax consolidation has benefit and demonstrates that it can succeed. Consolidated tax collection is operating efficiently on a county-wide basis in ten Pennsylvania counties. In another 26 counties, consolidation is on its way to becoming a reality.
Beyond regulated control of tax money moving more speedily back to municipalities and school districts that depend on it, the greater community that is the Commonwealth will become more attractive to business developers. Consider again our consumer habits. We gravitate toward products or services that are current and cutting edge, not those that are cumbersome or obsolete. We don’t select dial-up over DSL, and we listen to our music on iPods, not LPs. Recognizing our personal penchants for efficiency, speed and dependability, it’s easy to understand why businesses seeking to relocate to or expand in Pennsylvania would prefer a consolidated earned income tax collection system to the current fragmented approach.
Earned income tax consolidation provides clear solutions. With consolidation, payroll administration burdens will be lighter for employers, and the guesswork surrounding withholding is gone. Standardized tax withholding practices benefit all working Pennsylvanians, and those who currently contend with tedious and sometimes costly quarterly tax payments will find relief from this responsibility.
Every municipality and school district across Pennsylvania deserves its complete and fair share of earned income tax revenue—dependably distributed. For the common good, the time has come for earned income tax consolidation across the Commonwealth.
Mary L. Abbott
Mt. Lebanon, Pa. Tax Office Manager
Phone: (412) 343-3745
E-mail: [email protected]
The Pennsylvania Earned Income Tax Officers Collectors and Administrators Association, PEITOAC, opposes both House Bill 1550 and its companion bill Senate Bill 1063. While both of these bills have provisions in common with House Bill 1458 which consolidates offices at the school district level, these two bills would consolidate taxing districts at the county level. Our organization opposes county wide consolidation for many reasons.
Existing tax collection bureaus that represent entire counties or a large portion of any one county were formed by the voluntary participation of each municipality or school district involved. Districts within those bureaus have the right to exercise other collection options if the bureau does not meet their needs or expectations. HB 1550 and SB 1063 are both bills of no return and give local districts no options other than the countywide bureau.
Countywide tax collection committees would be formed and each taxing district within a county would have a delegate on the committee. In Allegheny County the tax collection committee would have over 170 delegates. Mandating countywide collection bureaus will create another layer of bureaucracy and further the distance between taxpayers and their municipalities and school districts.
We believe that taxes withheld by employers would be delayed reaching the proper districts since employers would be given the option of remitting taxes for all employees to one taxing district regardless of where the employees might be employed or reside. These tax dollars would then have to be forwarded to the proper county bureau and then on to the proper district.
Smaller, less affluent districts would be left with little or no input into the operation of a countywide bureau. Voting in each district would be weighted by either percentage of collections or by percentage of total population in the county. These districts depend upon this tax revenue for providing local services yet they will effectively be disenfranchised by these bills.
While the DCED may be committed to assisting with startup costs as well as with technical assistance, there is no guarantee that adequate state funding will be available to properly establish effective and efficient county bureaus that will meet the needs of member districts. Without these funds municipalities and school districts may have to budget for these startup costs while at the same time paying to maintain their current collection systems.
For these and other reasons we strongly urge support of House Bill 1458 which would effect positive change in the collection of the local earned income tax while keeping control of these funds in the communities who rely on them to provide the services upon which we have all come to depend.
We agree and have long advocated many of the uniformity issues addressed in HB 1550, SB 1063 and HB 1458. Uniform rules and regulations along with standardized forms are items PEITOAC has promoted for many years. Strict penalties for tax collectors who do not follow those rules and regulations have also been a goal of our organization.
Pennsylvania’s Earned Income Tax collectors are professionals dedicated to the collection of local earned income taxes with both pride and integrity. Our organization would welcome the opportunity to work with the Pennsylvania legislature in the spirit of commitment, cooperation and compromise to effect meaningful changes while maintaining local control over tax collections.
Pennsylvania Governor Ed Rendell has signed Senate Bill 1063, which will consolidate earned income tax collection in Pennsylvania. Consolidation will be phased in starting in 2010 and should be completed in 2012. To read some articles and opinions on the passing of the bill, click on the links below: