Source: Pennsylvania Economy League
The Case for Municipal Tax Flexibility
- Limitations on Act 511 taxes like the wage and local services tax mean municipalities that need revenue often have little choice than to raise property taxes.
- But there are issues with this overreliance on a single revenue source.
- Municipalities are not the only governing bodies that tap into real estate.
- School districts and counties make heavy use of property taxes, which strains the local tax base, particularly for low-income residents.
- Challenges with the current assessment system can make it difficult to obtain sufficient revenue even if a municipality decides to increase property tax rates.
- For instance, low millage values from old assessments can fail to produce adequate revenue even when rates are increased, while property tax collection rates sometimes decline when rates grow.
RECOMMENDATIONS
All of these options from PEL’s “It’s Not 1965 Anymore: State Tax Laws Fail to Meet Municipal Revenue Needs” are based on current models in the system.
Eliminate or raise rate caps.
Increase flat fees so they grow with inflation.
Provide additional authorization to tax non-resident commuters.
Offer a modern version of the business tax.
Consider new municipal options like a sale or a drink tax.
Mandate regular property assessments.
PEL’s “It’s Not 1965 Anymore: State Tax Laws Fail to Meet Municipal Revenue Needs” was funded in part by the Pennsylvania Municipal League