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Senate of Pennsylvania
Session of 2019 - 2020 Regular Session

MEMORANDUM

Posted:	January 17, 2019 04:23 PM
From:	Senator Robert M. Tomlinson
To:	All Senate members
Subject:	Sterling Act - Reimbursement and Credit

Please join me in cosponsoring legislation to alleviate municipalities from the burden of the Sterling Tax and allow those tax dollars to rightfully return to their home municipality. 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. The city 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. This legislation was cosponsored last session by Senators McIlhinney and Rafferty as Senate Bills 840 and 841.

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Document #1

Description:	This proposal is part of a two bill package  The first bill amends 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:

This proposal is part of a two bill package.  This second bill amends 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.