House Co-Sponsorship Memoranda

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House of Representatives
Session of 2023 - 2024 Regular Session

MEMORANDUM

Posted:	February 27, 2023 12:24 PM
From:	Representative Ismail Smith-Wade-El and Rep. Dave Madsen
To:	All House members
Subject:	Expanding Revenue Options for Municipalities

To:                  All House Members

From:              Representative Ismail Smith-Wade-El and Representative Dave Madsen

Date:               February 23, 2023

Subject:           Expanding Revenue Options for Municipalities

The City of Lancaster is a bustling, diverse place to live with a flourishing arts scene and projects that are bringing new life to dilapidated blocks. Unfortunately, it is in financial trouble. Stymied by a tax system that has not been updated in over half a century, Lancaster’s stagnant revenues cannot keep up with ballooning costs. Even more troubling, Lancaster is not a special case. Municipalities across our state are struggling to provide services because they are limited by current tax laws.

Certain taxes, such as the earned income tax and local services tax, have rate caps or flat rates that have not adjusted with inflation, forcing many municipalities to become over-reliant on real estate taxes. This presents its own challenges as many municipalities are full of tax-exempt properties and aging housing, limiting revenue further. If we do not update the tax system, we will see more municipalities cut critical services such as policing or firefighting—or worse, become financially distressed.

For this reason, we are introducing a package of bills to overhaul local taxes and ensure townships, boroughs, and third class cities have the flexibility they need. Our legislative package will do the following:

Eliminate rate caps for earned income taxes in townships, boroughs, and third class cities;

Allow townships, boroughs, and third class cities to levy a payroll tax; and

Allow townships, boroughs, and third class cities to raise the local services tax to $82 and index it to inflation.

Some of these tools are already available, but only if a municipality is in distress. We should be providing municipalities these tools to prevent them from falling into financial trouble in the first place. Please join us in co-sponsoring this important legislation to ensure the financial viability of our municipalities.

Document #1

Description:	Document 1 – This bill allows cities of the third class to levy an earned income tax without rate caps, levy a payroll preparation tax, and raise the local services tax to $82 and index it to inflation.
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Document #2

Description:	Document 2 – This bill allows boroughs and incorporated towns to levy an earned income tax without rate caps, levy a payroll preparation tax, and raise the local services tax to $82 and index it to inflation.
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Document #3

Description:	Document 3 – This bill allows townships of the first class to levy an earned income tax without rate caps, levy a payroll preparation tax, and raise the local services tax to $82 and index it to inflation.
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Document #4

Description:	Document 4 – This bill allows townships of the second class to levy an earned income tax without rate caps, levy a payroll preparation tax, and raise the local services tax to $82 and index it to inflation.
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