Delaware County

Progressive Budget Decision re Earned Income Tax

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  
  • Bequests
  • 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!

I came across an interesting article from December 11 concerning the borough of Yeadon, Delaware County — a community located close to the Philadelphia Airport.  I pulled up the demographics to compare Yeadon with Tredyffrin; as you can see they are vastly different.  The median income of Yeadon is approximately one-half the level of Tredyffrin, with 3 times the number of people living under the poverty level.  The point of the comparison is that Yeadon is making a progressive budget decision for 2010 and instituting an Earned Income Tax!  The borough manager believes the move will diversify the tax base and help the seniors stay in their home (the EIT will reduce their property taxes).  I have no idea what the average education level is in Yeadon, but I’m going to make a broad guess and bet that it is far lower than the average Tredyffrin resident.  Why do you suppose than that Yeadon’s leadership was able to conclude that the severity of the economic situation required an Earned Income Tax?  I am  guessing that paying an additional 1% tax to residents of Yeadon is going to be a lot more difficult than a similar tax would be to Tredyffrin residents.  It’s probably a safe assumption that our average Tredyffrin taxpayer is in a far better financial situation than a Yeadon resident. I salute Yeadon Borough for analyzing their economic climate and making this progressive budget decision.

Below is a demographic comparison of Yeadon vs. Tredyffrin with the article concerning Yeadon’s progressive 2010 budget decision. 

Demographics of Yeadon, Delaware County:  As of the census of 2000, there were 11,762 people, 4,696 households, and 2,967 families residing in the borough. The median income for a household in the borough was $45,550, and the median income for a family was $55,169. The per capita income for the borough was $22,546. About 14.6% of the population were below the poverty line.

Demographics of Tredyffrin Township, Chester County: As of the census of 2000, there were 29,062 people, 12,223 households, and 7,834 families residing in the township. The median income for a household in the township was $90,915 and the median income for a family was $121,809. The per capita income of the township was $47,584.  About 3.7% of the population was below the poverty line.

Yeadon Adopts EIT, Decreases Property Taxes

Published: Friday, December 11, 2009

YEADON — Officials will end the year with two bold financial moves.

Council voted 4-0 Monday to impose a 1 percent earned income tax, expected to channel about $900,000 into borough coffers annually.

While municipalities often adopt EITs to close looming budget shortfalls, Interim Borough Manager Paul Janssen said he recommended it as a means of diversifying the tax base.

“Seniors have to pay property taxes like crazy to be able to stay in their house. If council can shift this to an EIT and add a property tax cut it has huge benefit to seniors.” And “They get a tax source that grows.”

Officials plan to use the new tax to decrease property taxes by 1 mill, lowering the rate from 9.89 to 8.89 mills, about 10 percent. The reduced rate had been advertised and is scheduled for adoption Dec. 17. The EIT will also eliminate need to dip into the borough’s fund balance. Janssen said Yeadon had a balanced budget, but it included $197,000 from reserves.

Said Vice President Jack Byrne, “The EIT will generate more revenue for the borough and we’re going to reduce taxes. We have a lot of seniors here and it’s going to be helpful for them.”

Byrne noted that many residents who work outside the borough already pay the EIT, but to the municipality where they work. Adopting an EIT will allow Yeadon to capture those monies.

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