Harrisburg Mayor Eric Papenfuse announced today that he would seek to raise the Local Services Tax (LST) for workers in Harrisburg from $52 to $156 per year. The move would affect both City residents and the tens of thousands of people that commute into the City every day to go to work. The preliminary revenue estimate for the increase is $4 million.
The LST is a tax with which most readers are familiar – it is imposed by a municipality pursuant to the Local Tax Enabling Act and in the jurisdiction where the person is employed. Under the Local Tax Enabling Act, the local services tax may actually be imposed at any rate, up to a maximum of $52, so long as the rate is uniform for all individuals. If the municipality charges a local services tax at a rate in excess of $10, it must exempt from the tax any person whose income is less than $12,000.
As we noted in an article that was published in The Legal Intelligencer in March, the ability to increase the LST beyond the usual maximum limit of $52/year is limited to municipalities enrolled in the Commonwealth’s program for financially distressed municipalities, known as Act 47, and was added to Act 47 by the enactment of Act 199 of 2014, which contained a larger package of reforms of the Act 47 recovery process.
Under Act 199, the option of raising the LST beyond $52/yr is only available to those municipalities that were authorized at the time Act 199 was enacted to request the court for the imposition of an earned income tax on nonresidents. And, in seeking an increase in the LST above $52/year, the municipality must also raise the income exemption threshold from $12,000 to $15,600.