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Commuter tax tough to enact

Tuesday, November 11, 2003

By Tom Barnes, Post-Gazette Harrisburg Bureau

They are two words that strike fear in the hearts of thousands of suburbanites who work in Pittsburgh -- commuter tax.

 
 
Online graphic

What the commuter tax would cost you

   
 

The official term, preferred by the state Department of Community and Economic Development, is an "earned income tax on nonresidents of a municipality," but that sounds a bit bureaucratic and doesn't really grab people's attention like the term "commuter tax."

"Under Act 47, an earned income tax on nonresidents is one of the available sources of revenue that can be included in a fiscal recovery plan," Ken Klothen, executive director of the Governor's Center for Local Government Services, part of DCED, said yesterday.

But the drastic step of a commuter tax is by no means automatic. There are a number of hurdles that must be cleared before suburbanites have to fork over some of their wages to Mayor Tom Murphy.

First, DCED Secretary Dennis Yablonsky, who lives in Mt. Lebanon, has to study the city's problems and decide if it qualifies as an "economically distressed" community under a 1987 state law called Act 47. If so, he names a fiscal expert who has to decide whether to include a nonresident wage tax as part of the overall solution to the city's financial woes.

Then the tax has to be approved by City Council, signed by Murphy and approved by an Allegheny County Common Pleas judge.

"The judge must decide if the nonresident earned income tax is warranted," Klothen said. The City Council would set the tax at a certain rate. Even if a nonresident wage tax is enacted for one year, it faces reapproval by the Common Pleas Court each succeeding year.

It isn't known yet, of course, what the tax rate might be on suburban commuters who work in Pittsburgh, but it can't be any bigger than the 1 percent wage tax that Pittsburgh city government now levies on its residents. (The city school board imposes an additional 2 percent wage tax.)

Here's another important point -- a city commuter tax would be softened somewhat by the amount of wage tax that a nonresident pays to the town where he or she lives.

If Pittsburgh, for example, enacted a 1 percent nonresident wage tax and a suburban commuter already paid a 0.5 percent wage tax to his home municipality, he would pay only 0.5 percent to Pittsburgh. On a commuter's annual salary of $50,000, the commuter tax would be $250 a year and the wage tax paid to a person's home municipality would be $250.

If the home community charges 1 percent or more, the resident would not pay anything to Pittsburgh.

"You get credit for the amount of wage tax you pay to the town you live in," said David Miller, a University of Pittsburgh professor and former Pittsburgh finance director who has developed some recovery plans for distressed towns.

"Pittsburgh would receive the overage, the amount over what a resident pays to his home municipality," Klothen agreed.

There is still a lot of political fighting to go before a commuter tax is enacted in Pittsburgh. State Rep. Jeff Habay, R-Shaler, an outspoken opponent of such a tax, said yesterday he'll ask state House leaders in Harrisburg to expedite consideration of legislation he has introduced in October along with three GOP House colleagues, Tom Stevenson of Mt. Lebanon, Mike Turzai of Bradford Woods and Mark Mustio of Moon.

The GOP House bill would create a fiscal oversight board for the next seven years, whose job would be to find ways to reduce city expenses. The bill wouldn't authorize any additional taxing authority for Pittsburgh. And the measure would prevent Pittsburgh from implementing Act 47 for the seven years the oversight board is in existence.

A similar oversight measure has been introduced in the state Senate by Sen. Jane Orie, R-McCandless, and Sen. Jack Wagner, D-Beechview.

Even if the Legislature approves one of the GOP bills, Gov. Ed Rendell, a Democrat and Murphy ally, could veto it.


Tom Barnes, the Post-Gazette's bureau chief in Harrisburg, can be reached at tbarnes@post-gazette.com or 1-717-787-4254.

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