Bipartisan legislators from Bucks County have sent a letter to Philadelphia Mayor Jim Kenney seeking reimbursement for suburban commuters who worked from home during the pandemic.
Kenney is requiring each non-resident’s employer inform the city that its workers were required to work from home during the pandemic before being reimbursed for the city wage tax.
“Due to this hurdle, suburban workers will leave thousands of dollars in the city coffers for hours worked in Bucks, Montgomery, Chester and Delaware counties,” said Wendi Thomas (R-Richboro). “That’s money the city is not entitled to.”
Employees who are non-residents of Philadelphia and work in the city are subject to the Philadelphia Wage Tax at a rate of 3.5019 percent. Employees who did not work in the city on a particular day are not legally required to pay the city wage tax for that day. In light of the work from home mandate, many of these residents are owed reimbursement of wage tax withholding. The Bucks County legislators feel the city is making it unnecessarily difficult for suburban residents to receive this refund of their wages which they are entitled to under state law.
“Given the state mandate to work remotely unless impossible up until April 1, 2021, (and it is still strongly encouraged by Gov. Tom Wolf according to his most recent guidance to business) the requirement to provide an employer letter is burdensome and unnecessary,” the delegation wrote in the letter to Kenney.
Legislators who joined Rep. Wendi Thomas by signing the letter include Reps. Frank Farry (R-Langhorne), Tina Davis (D-Levittown), John Galloway (D-Levittown), Shelby Labs (R-Doylestown), Todd Polinchock (R-Chalfont), Meghan Schroeder (R-Warminster), Craig Staats (R-Quakertown), KC Tomlinson (R-Bensalem) and Perry Warren (D-Yardley). This is the entire State House Delegation from Bucks County.
To prevent this from occurring in the future and to help suburban townships, Farry and Thomas have introduced legislation to amend the Sterling Act (Commuter Tax) with House Bill 949. The Sterling Act, enacted in 1932 to assist Philadelphia following the depression, is Pennsylvania’s first local income tax enabling legislation and grants the City of Philadelphia broad taxing authority.
Under the act, non-residents who commute to work in Philadelphia must pay the Philadelphia Wage Tax. However, unlike the imposition of local taxes in other taxing jurisdictions, none of the non-resident City Wage Tax is returned to the non-resident’s home government.
As of July 2020, in the midst of the pandemic, the city raised this tax on commuters, but not on those who live in Philadelphia. This is the highest city wage tax in the country.
“As a result of this disparity of tax practice, surrounding suburban areas are losing significant tax revenue to support their operations including police, fire and EMS,” said Farry. “Local governments in Bucks County lost about $8.6 million in revenue for 2017. To be clear, these local municipalities are receiving zero Earned Income Tax dollars from those who work in the city. This increases the tax burden on all of the residents and business in those communities.”
House Bill 949 would correct this “unfair and long-overdue” issue by amending the Sterling Act to require Philadelphia reimburse the surrounding taxing jurisdictions that impose an Earned Income Tax at a rate equivalent to that which would have been collected from commuting workers of their respective boroughs and townships.
“At a time of economic insecurity for many Pennsylvanians, Bucks County residents and their home governments are entitled to this refund which will help local fire and police entities hard hit by the pandemic,” the Bucks County delegation wrote to Kenney.