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On May 11, Vandling Township became the 19th municipality in Lackawanna County to oppose Act 32 of 2008, a state-wide law which seeks to consolidate earned income tax collections.
“Supposedly this is going to be more efficient,” said Alexander Chelik, mayor of Mayfield. “A lot of communities beg to differ.”
Act 32, which was passed on July 2, 2008, by Pennsylvania Governor Ed Rendell, was the culmination of “a three-year study that documented the fragmentation, complexity and inefficiency of the earned income collection system,” according to a statement made on Pennsylvania site www.newpa.com.
Under the law, the state’s 560 tax collectors will be reduced to 69 and is estimated to save $237 million dollars annually on revenue.
Currently, each municipality and school district appoints its own earned income tax collector. Under Act 32, each county will have one tax agency to submit yearly returns.
Nineteen municipalities have sent letters to state representatives Jim Wansacz and Senator Robert J. Mellow requesting the act be amended.
In a response letter to Glenburn Township, Mellow stated Act 32 was “a collaborative effort among the General Assembly, DCED (Department of Community and Economic Development) and various stakeholders that began more than four years ago.”
The PA League of Cities and Municipalities, PA State Association of Boroughs, PA State Association of Township Supervisors and the PA Chamber of Business and Industry were also named as supporters of the act.
“We cannot afford to continue these kinds of revenue losses on the local level,” Mellow stated. “I remain supportive of the consolidation of local tax collection.”
A main concern for municipalities who do not support the act as it currently exists is what those municipal officials believe it could result in a loss of revenue for their own municipality.
Chelik said to his knowledge none of the municipalities had been contacted for input prior to the act’s passage.
“The law is already passed. None of the local governments were asked for their opinion. They know better than anybody what’s good for their community, not the state,” he said. “It’s a stacked deck against small communities. If this is such a good law, then why don’t they allow us to opt in or opt out? The state has shut us out of the control over our own destiny.”
Clarks Summit Borough Manager Virginia Kehoe said the borough is hesitant moving forward under the law as there are still unanswered questions.
“The theory behind it is great, but theories don’t always work,” Kehoe said. “It’s impossible to predict. We still don’t know how well or how poorly they’ll handle it. I don’t think it’s the right time.”
Bill White of Abington Township said that township supervisors are especially concerned because the decision of who would ultimately collect taxes for Lackawanna County will be weighted according to population. This means, according to the act, that Scranton would have the majority vote on tax collection services.
“This is serious,” White said, “because our representation will be so miniscule.”
The consolidation also has White concerned with potential regionalization of services. As it is now, he said, municipalities around the Abingtons have the option to contract with other municipalities for services such as fire, police and emergency services or to cancel contracts if the municipalities feel they are no longer needed.
“The smaller municipalities have control over their services,” said White. “What we’re looking for (with Act 32) is the option to opt in or opt out so we maintain control.” Furthermore, White said that the economic status of cities such as Scranton should not be allowed to affect smaller municipalities.
“They’re a distressed city,” he said. “We operate on a balanced budget. If we don’t have the money, we don’t provide the service. Scranton cannot do that.”
Clarks Green treasurer Janice Brown collects the earned income tax for her borough. She agreed with White that the tax collection should remain on a local level. “There’s too much of a broad spectrum if another municipality is collecting our taxes,” she said. “It’s going to make it a lot more difficult to get tax money back if it goes to the wrong place.”
Brown also agreed the municipalities should be allowed to keep control. “Each municipalities needs to have control,” she said. “If we can maintain our own tax collection, that would benefit us the most.”
In Wyoming County, however, hope remains that the municipalities will be able to keep their current tax collection agency Berkheimer Associates.
Factoryville borough treasurer Mary Ellen Buckbee said that her associate from Berkheimer had expressed to her confidence that the tax firm would receive the bid for earned income tax collection duties throughout Wyoming County.
According to Pearl Salvo of Berkheimer Associates, the firm already represents most of Wyoming County, including Lackawanna Trail and Tunkhannock school districts. For that reason, Lackawanna Trail School District’s business manager, David Homish, said he was not as concerned as many of the people in Lackawanna County were about the act.
“If everything is collected the way its being collected now,” said Homish, “and the money is turning over quickly, we’ll be fine.”
However, some concern remained on a municipal level that tax monies would not be received by the borough for residents who work in Lackawanna County.
“We are a little concerned because we want to make sure the money comes back to where it belongs,” said Tom Davis, vice president of Factoryville Borough Council. “Berkheimer does a fair job, but that still doesn’t solve our problem because most of our residents work in Lackawanna County.”
Dalton borough secretary Paula Vail also currently uses Berkheimer Associates for earned income tax collection and she hopes to be able to keep it that way.
“Right now, with the communication that I have with them, I don’t have any problems,” said Vail. “We have a system that we feel works, and sometimes if it isn’t broke, you shouldn’t fix it.”
Dalton passed a resolution to request the ability to opt out of the EIT act Still, Vail said she wanted to wait until she learned more about the benefits of the new act before she decided if it was going to help or hinder the borough. “Instead of being on one side or the other, I want to learn more about it so I can best advise my council,” Vail said.
Vail will have the opportunity to do just that at an Act 32 training seminar on June 2 beginning at 6 p.m. at the Inn at Nichols Village. The seminar, titled “Act 32: Earned Income Tax Collection: Is Your School District or Municipality Ready,” is open to municipal and school district representatives from Lackawanna, Susquehanna, Pike, Wayne and Wyoming counties. For details, call 717-763-0930.