House Bill 2557, sponsored by state Rep. Greg Rothman of the 87th legislative district, would grant Harrisburg the power to levy its current tax rates indefinitely. The city raised its local services tax (LST) and earned income tax (EIT) in 2012 and 2016, respectively, exercising a privilege granted by Act 47, a state-run oversight program for financially distressed municipalities.
Rothman announced the bill in a press release issued late this afternoon.
The tax hikes were meant to be temporary, and would disappear if the city exits Act 47.
But they bring in a combined $12 million for Harrisburg, and local officials say the city can’t function with lower tax rates.
City officials have lobbied state lawmakers for months to allow the city to keep its current taxing authority past 2021, when it must exit Act 47. Rothman’s bill would let it to do just that.
The bill would also prohibit the city from taxing the income of non-resident commuters – a proposal that Harrisburg Mayor Eric Papenfuse floated this summer, amid concern that the city would lose its LST and EIT rates under an Act 47 exit plan.
The mayor’s proposal would have levied a 2 percent income tax on everyone who works in Harrisburg.
Since Harrisburg residents already pay that rate, it would only affect commuters from surrounding municipalities who pay lower taxes to their hometowns. Residents of Susquehanna Township, for instance, who pay a 1 percent income tax, would pay the same amount to the city of Harrisburg.
That proposal wasn’t endorsed by the state Department of Community and Economic Development, which is drafting Harrisburg’s Act 47 exit plan.
Rothman, whose district includes much of Cumberland County, said in a press release that a commuter tax would encourage people to seek jobs outside of the city, thereby limiting economic development in Harrisburg.
“The economy of Harrisburg affects the surrounding suburbs and we should work to ensure that it is healthy for the long term,” said Rothman. “However, we don’t need a commuter tax levied on the workers in Harrisburg and its imposition would be devastating to attracting and maintaining private investment to the city.”
Rothman will testify at a joint public hearing on Act 47 on Tuesday, Sept. 27.