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Pennsylvania House of Representatives
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House of Representatives
Session of 2015 - 2016 Regular Session


Posted: June 22, 2016 04:04 PM
From: Representative Scott A. Petri
To: All House members
Subject: Sterling Act - Credit
This week I will be introducing legislation that will amend the Local Tax Enabling Act to remove Philadelphia’s power of pre-emption on local income taxes by allowing individuals working in Philadelphia to pay their resident local tax and receive a credit against the Philadelphia non-resident wage tax.

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. Currently, 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 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 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. My legislation will allow 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 rate equivalent to the local tax rate that is now being collected by their resident tax jurisdiction.

I hope you will consider joining me in sponsoring this important legislation.

Introduced as HB2257