PA Department of Community and Economic Development Ready to Kick Off Process of Consolidating Earned Income Tax Collection

Pennsylvania’s Earned Income Tax (EIT) system is grossly inefficient.  That was the conclusion of a prior study by the Pennsylvania Department of Community and Economic Development (DCED).

If you are a municipality that imposes an EIT, or someone who is responsible for paying or even withholding the EIT, you already knew that.  To put it in perspective, though, consider that Pennsylvania has more local taxing jurisdictions (more than 2,900) levying a local income tax than all other states combined.  Those taxes are collected by 560 different entities.  That’s a lot of opportunity for inefficiency – and lost revenue.  DCED estimates that some $237 million is lost annually.

In response, the Legislature adopted a plan to consolidate the collection of these taxes, by reducing the number of collectors to 69.  The tax collection districts will roughly follow county borders but will not split up those school districts that lie on the border between more than one county.

According to the law, known as Act 32 of 2008, the first step in this process is for DCED to finalize a map of the 69 new taxing districts.  The map was to be completed by January 16, 2009, and will soon be published in the PA Bulletin and on the DCED website.

This starts what will be a long process that ultimately will result in the naming of new collectors for each new Tax Collection District.  The new collectors will not begin serving until the year 2012.  Stay tuned, though, for more about how this change will occur.

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