(The Center Square) – A Pennsylvania lawmaker wants to allow counties to enact a 1% sales tax that local municipalities can use to shore up pension obligations, maintain core services or put to other uses.
State Rep. Michael Sturla, D-Lancaster, spelled out the proposal in a legislative memorandum.
“The impetus is local municipalities across the state are struggling,” Sturla told The Center Square, pointing to Lancaster’s precarious financial situation as an example. “We tend to attract the people who need the most services and have the least ability to pay taxes.”
The proposed legislation would allow counties to enact a 1% sales tax through voter referendum or county board ordinance that would be collected with state sales tax and redistributed back to the counties, which would allocate the money based on the assessed value of tax-exempt properties.
“It allows for a redistribution for that 1% sales tax within the county to the municipalities that need it the most,” Sturla said. “In a lot of cases, it’s going to fix a pension system, fix a water and sewer system … allow for not closing a police department.
“The county, because it’s home to all the tax exempt properties, would get a portion also,” he said.
Sturla said preliminary calculations estimate a county such as Lancaster, with about 550,000 people, would generate about $90 million through a 1 cent sales tax.
“That’s a boat load of money for municipalities that are struggling,” he said.
Municipalities that are not struggling financially could use the funds to lower taxes, Sturla said.
“The reality is this would be a recurring revenue source for municipalities so they don’t have to keep going back and tapping property owners,” he said.
Sturla noted “there’s no new infrastructure needed for this,” but the proposal would require local governments to assess tax exempt properties they normally would not assess.
“Usually counties assess (tax-exempt properties) every 10 to 20 years, so now in exchange for the first year of getting that revenue they would have to go out and assess,” he said.
The bill also would include provisions in the event the generated sales tax doesn’t line up with the assessed value of tax-exempt properties.
“If revenue generated exceeds or does not cover the assessed value of tax-exempt properties for both the county and municipality, then the money shall be distributed proportionally on a pro-rated basis based on millage rate of the county and municipality,” according to the legislative memo.
Sturla is working with county and municipal associations to develop the specifics of the legislation, which he hopes to introduce in February.
So far, he said, feedback has been positive.
Some local leaders expressed concerns about potential public opposition to imposing the 1 cent tax, though other enactment options like a voter referendum should alleviate those concerns, he said.
“I’m not wed to the details of the bill, I’m wed to the concept of the bill,” he said.
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