State Sen. Frank Farry (R-6) introduced legislation on the Sterling Act and its impact on suburban communities following a public hearing with the Senate Majority Policy Committee.
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.
During the hearing, it was learned that Bucks County municipalities estimate to be shortchanged close to $10 million annually, including Bensalem Township $2.5 million, Northampton Township $1.1 million and Middletown Township $685,000 annually because of this antiquated law. This is money, said Farry, that should go toward supporting these municipalities’ police, fire and EMS services, and road projects.
The City of Philadelphia imposes a City Wage Tax on salaries, wages, commissions and other compensation paid to employees that are employed within Philadelphia. The non-residents are required to pay this wage tax whether they commute to Philadelphia or work at home. Currently, that wage tax is 3.44 percent, with none being remitted from Philadelphia to the employees’ home municipality unlike every other municipality in the state.
“We have tried for well over a decade to shine the light on this issue that greatly affects our residents and our municipalities,” said Farry. “Whether you work in Philadelphia or not, this impacts you because you have to pay higher property taxes to fund your municipality. On top of that, those whose employer is in Philadelphia, but are really working from home, are still forced to pay the tax even though these employees never set foot in the city.
“My legislation will correct this tax inequity by addressing Philadelphia’s power of pre-emption on local income taxes by applying tax collection practices that mirror those exercised by all other taxing jurisdictions across the Commonwealth under the Local Tax Enabling Act.”