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Senate Co-Sponsorship Memoranda
Senate of Pennsylvania
Session of 2025 - 2026
Regular Session
MEMORANDUM
| Posted: | December 2, 2024 09:34 AM |
|---|---|
| From: | Senator Frank A. Farry and Sen. Tracy Pennycuick |
| To: | All Senate members |
| Subject: | Sterling Act Reimbursement |
| The Senate Majority Policy Committee held a hearing last session on the Sterling Act and the negative impacts it has on residents outside of Philadelphia. We plan to introduce legislation to equitably address Philadelphia’s power of pre-emption on local income taxes by applying tax collection practices that mirror those exercised by all other taxing jurisdictions across the Commonwealth under the Local Tax Enabling Act. The Sterling Act, enacted in 1932 to assist Philadelphia following the depression, is Pennsylvania’s first local income tax and grants the City of Philadelphia broad taxing authority. The city imposes a City Wage Tax on salaries, wages, commissions, and other compensation paid to employees working for a Philadelphia employer. All Philadelphia residents owe the City Wage Tax regardless of where they work. Non-residents who work in Philadelphia must also pay the Wage Tax. However, unlike the imposition of local taxes in all other taxing jurisdictions, none of the non-resident City Wage Tax is returned to the non-resident’s home municipality. As a result of this disparity of tax practice (often called a commuter tax), many surrounding suburban areas are losing significant tax revenue to support their police, fire, EMS, and schools from their residents who work in Philadelphia. As an example, the communities in Bucks County lose over $10 million per year due to the Sterling Act. To be clear, these local municipalities are receiving ZERO earned income tax dollars from those that work in the City but reside in Bucks County, thus increasing the tax burden on all who do not work in the City of Philadelphia. Many municipalities in surrounding counties are impacted in the same manner. The COVID-19 pandemic further highlighted the inequalities of the Sterling Act, people who worked from home, and never set foot in the city, had to pay this tax despite government work from home orders. Our legislation would seek to ensure remote work, outside the City, is not charged under the Sterling Act. Please join us in cosponsoring legislation to alleviate municipalities from the burden of the Sterling Tax and allow those tax dollars to rightfully return to their home municipality as well as residents only being taxed when they physically work in Philadelphia. Previous co-sponsors were Senator Martin and Laughlin. |