Pattye Benson

Community Matters

Earned Income Tax

Important Decisions Await TESD School Board . . . Finance Committee Meeting Date Changed . . . EIT vs PIT . . .Teacher Contracts . . . Many issues, where does this leave the taxpayers?

March 30, 2010
25 Comments

Community Matters has been focused on Mt. Pleasant and sidewalks lately, but I think it is probably time to re-focus attention on TESD and the 2010-11 budget. The Finance Committee Meeting has been changed from April 12 to April 19, 7:30 PM at Conestoga HS, please note the change. Click here for the District’s update on the March 22 School Board Meeting.

At the District Budget Meeting held earlier this month, there was EIT vs. PIT (Earned Income Tax vs. Personal Income Tax) discussion. School Board member Debbie Bookstaber asked whether a PIT could be considered under Act 511 – a personal income tax that taxes all income, earned and unearned with social security and pension income exempt. Debbie was a member of the Tax Study Commission and sees the PIT as a fairer tax if an income-based tax were adopted. It was agreed there would be follow-up information provided at the April 19 Finance Committee Meeting. I wonder if the District solicitor has weighed in on the discussion. Here are some questions that might generate discussion:

  • Can the school district impose a PIT on the residents?
  • Does Act 511 permit the District imposing PIT?
  • Would imposing PIT require voter referendum?
  • Would the imposition of PIT reduce property taxes?
  • Is a voter referendum required for EIT?
  • If there was an EIT, how would the split of revenue work between Tredyffrin and Easttown Townships?
  • Does an EIT reduce the property tax bill?
  • Would both townships be required to have an EIT in place to receive the revenue? Or, would the townships receive their portion of the school district’s EIT revenue?
  • Would there be a difference to the teacher unions in regards to an EIT or PIT?

Remember, the TESD 2010-11 budget has a substantial deficit — salaries and escalating pensions and health care benefits are driving the expenses upwards. The District has some hard decisions to make about these current and future District benefits. I recently received an email from Malvern resident Ray Clarke, which offers interesting information:

” . . In many NJ school districts the unions have accepted salary freezes and contributions to health benefits costs. The Governor has piled on, calling on unions in all districts to do so. At the state level the NJEA is resisting the call, framing Christie as “the rich man’s governor” because he is not imposing a surtax on incomes over $400,000. Locally, though, 64% of districts are talking to their teachers about re-opening contracts, while nearly all the rest are at the end of contracts and negotiating new ones. . . “

  • Where does our School Board stand on the issue of the teacher’s contract?
  • Should the TEEA (Tredyffrin Easttown Education Association) teachers union be asked to help with the budget resolution?
  • Has the TEEA made formal suggestions to the School Board on ways to help reduce teacher-related expenses?
  • What about the state, . . . does the Governor have an obligation to the school districts and their residents?

Bad News for Easttown Township – Our Neighbors Receive a 12% Tax Increase

December 23, 2009
3 Comments

Our neighbors in Easttown Township are faced with a 2010 budget that includes a 12% real estate tax increase which includes a new $52 Local Service Tax (LST) for all those who work in the township. The budget deficit facing the township for 2010 was approximately $500K and the LST will provide approximately $135K revenue. Easttown Supervisor Ed Strogen was the sole dissenter on the 2010 budget and has doubts that the full estimated LST will actually be collected. Supervisor Strogen was also a strong supporter of instituting an Earned Income Tax (EIT) in the township; raising the point of how much revenue residents are currently paying to other municipalities (who do have an Earned Income Tax). A tax collection company suggested that imposing a 1% EIT in Easttown Township would have provided $1 Million revenue in 2010, and $3 Million the following years. Unfortunately, the support was not there for the institution this year of an EIT. However, passing their 2010 budget with a 12% tax increase to the taxpayers is going to be difficult for many of their residents. This increase will certainly be challenging to those retired individuals on fixed incomes.

In the aftermath of the 2010 budget passage, Supervisor Strogen contends that an EIT will need to be implemented in the next few years. Let’s remember that Tredyffrin residents are currently paying $3 Million to other municipalities (which have an EIT) and it was determined that the implementation of an EIT in Tredyffrin would result in revenues of approximately $8 Million. The difference between Easttown and Tredyffrin Townships on the subject of EIT, was that Easttown provided an open town hall forum for thorough discussion of the subject, whereas Tredyffrin did not.

Easttown’s primary budget problem stems from their loss of real estate transfer tax which accounts for approximately 18% of all its budgeted revenue. Like Tredyffrin, Easttown’s budget has suffered with the downturn in real estate transfers, increased cost of services and the severity of our economic times. Easttown and Tredyffrin Townships need to become more proactive in their long-range budget forecasting. In both of these municipalities, what has played out in this budget cycle has been a short-term Band-Aid approach. These townships should not wait until 2nd or 3rd quarter to begin to look at 2011, but rather they need to start in January with focused, out-of-the-box exploration of all possible revenue sources. Easttown and Tredyffrin Townships barely got by with the 2010 budget round and I think it’s going to be far more difficult to pull off an 11th hour ‘quick fix’ save for the 2011 budget!

Progressive Budget Decision re Earned Income Tax

December 13, 2009
17 Comments

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.

Community Matters © 2024 Frontier Theme