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House of Representatives
Session of 2019 - 2020 Regular Session

MEMORANDUM

Posted:	May 28, 2019 12:44 PM
From:	Representative Frank A. Farry and Rep. Wendi Thomas
To:	All House members
Subject:	Sterling Act Reimbursement and Credit

We plan to introduce two pieces of legislation to remove Philadelphia’s power of pre-emption on local income taxes by applying tax collection practices that mirror those exercised by other taxing jurisdictions under the Local Tax Enabling Act. The Sterling Act, enacted in 1932 to assist Philadelphia following the depression, is Pennsylvania’s first local income tax enabling legislation and grants the City of Philadelphia broad taxing authority. As you know, the City of Philadelphia imposes a City Wage Tax on salaries, wages, commissions, and other compensation paid to employees working for a Philadelphia employer. All Philadelphia residents owe the City Wage Tax regardless of where they work. Non-residents who work in Philadelphia must also pay the Wage Tax. However, unlike the imposition of local taxes in other taxing jurisdictions, none of the non-resident City Wage Tax is returned to the non-resident’s home district. As a result of this disparity of tax practice, many surrounding suburban areas are losing significant tax revenue to support their police, fire, EMS, and schools from their residents who work in Philadelphia. As an example, Bucks County lost about $8.6 million in revenue for 2017. We hope you will consider joining us in sponsoring these two important pieces of legislation.

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Document #1

Description:	Our first piece of legislation will amend the Sterling Act to require Philadelphia to reimburse the surrounding taxing jurisdictions that impose an earned income tax at a rate equivalent to that which would have been collected from residents of their respective areas.

Document #2

Description:

Our second piece of legislation will amend the Local Tax Enabling Act to allow a taxing jurisdiction with residents working in Philadelphia and paying the non-resident wage tax to collect the resident local taxes from those individuals.  In turn, the individual would be permitted to receive a credit against the Philadelphia non-resident wage tax at a rate equivalent to the local tax rate that is now being collected by their resident tax jurisdiction.