Back on December 13th, I wrote of the need for residents to fully understand Earned Income Tax (EIT). We are now in the 3rd quarter of 2010, and there is evidence that the 2011 township budget is going to face even greater challenges than this year’s budget. I went back and found the post; below is an excerpt. Nearly seven months later, I think it is important to re-visit the discussion.
Although some Community Matters readers may disagree, I continue to believe that an open, honest discussion with the public of all revenue sources needs to be an integral part of our local government. We can not afford to wait until November to begin the 2011 budget discussions.
At times misunderstood when campaigning, I often suggested that the township needed to explore Earned Income Tax (EIT) as a possible revenue source. There was (and continues to be) a lot of inaccurate information circulating about Earned Income Tax. An example of misinformation occurred at the last Board of Supervisor Meeting, when Supervisor Chair Warren Kampf indicated that those individuals who lost their jobs would pay Earned Income Tax (if Tredyffrin were to have an EIT). I hope that Mr. Kampf did not intentionally try to confuse the public with his words; the fact is that individuals receiving unemployment benefits would not pay Earned Income Tax; unemployment benefits are not subject to EIT.
I thought it might be useful to list examples of income which are not subject to Earned Income Tax:
- Retirement Pensions
- Disability Payments
- Active Military Pay
- Unemployment Compensation
- Insurance Proceeds (non-business)
- Workmen’s Compensation
- Stock Dividends (non-business)
- Gifts/Lottery Winnings
- Social Security
- Interest (non-business)
- Military Bonuses
Earned Income Tax is based on gross wages, salaries, commissions and other earned compensation. As stated numerous times, approximately $3 million is being paid to other municipalities by Tredyffrin residents. If an EIT were in place, this revenue would return to the township. Dave Brill, Township Finance Director, has offered that the potential township revenue could be as high as $8 million (should Earned Income Tax be instituted).
Assuming that we get through the township budget discussion on December 21 with the proposed draft budget more or less intact, I still contend that the 2010 budget is nothing more than a Band-Aid solution to a far greater financial problem. I believe that the township will limp along through 2010 with the budget in place. However, without financial foresight, this time next year the township will be faced with a far greater problem than the reinstatement of $20K to the Fire Department. The 3 new supervisors all campaigned (and were elected) on the ‘no new taxes’ mantra and they will probably take office on January 4 with that promise intact. However, it doesn’t take my London School of Economics education to believe that their promise will be short-lived. Financially the township is in a very precarious financial situation and we are going to witness firsthand the result of shortsighted financial planning.
I know that this posting of Earned Income Tax discussion will bring opposing comments, and I actually encourage the dialogue. Tredyffrin’s 2006 Tax Study Commission and voter referendum overwhelmingly were against imposing an EIT. Warding off that particular argument, clearly 2010 can not possibly be compared economically to 2006; it is a vastly different financial climate facing this township. I may have been one of the voters in 2006 who opposed an EIT; believing that the township at that point did not have severe financial needs to warrant that taxation approach. However, if in 2009 this township’s annual budget of $37 million can not fund $20K to our firefighters, something is dramatically different in this current picture. Each and every taxpayer needs to take a careful look at the proposed 2010 township budget — I believe the future is going to require more than simply tightening our belts as has been suggested by some of our township leaders, as a response to our economic problems!