The revenue from this earned income tax must be used first to replace the revenues lost from certain repealed taxes and then to reduce school property taxes. In order to impose this earned income tax, a school district must first obtain the approval of the electorate by a referendum. The earliest any school district could put this referendum before the voters is November 1999. I have several concerns with this new law. Earned income is limited to wages and net profits from a business whereas personal income includes earned income plus interest dividends, capital gains and S-corporation income.
Personal income is broader based and more reflective of a person's ability to pay taxes.
Second, the Act does not adequately deal with the Sterling Act problem. Under the Sterling Act, passed in 1932, if a suburban municipality such as Haverford or Radnor Township were to impose a local income tax, suburban residents workingin Philadelphia would pay the Philadelphia wage tax instead of their own municipality's income tax. The revenue lost to our townships because of the Sterling Act has been a disincentive for Haverford and Radnor Townships to adopt a local income tax. Act 50 does not adequately deal with the Sterling Act problem. Finally, this legislation doesn't offer relief to poorer school districts.