Senate passes legislative fix allowing Harrisburg to exit Act 47

After months of lobbying, Harrisburg has the legislative approval needed to exit Act 47 while preserving its special taxing authority for five more years.

The state Senate on Wednesday passed legislation by a 46-3 vote to allow the capital city to leave the state program for distressed municipalities, sending it to Gov. Tom Wolf, who is expected to sign it. The House passed the bill, House Bill 2557, earlier in the week by a 185-5 vote.

The measure would allow Harrisburg to preserve higher earned-income and local services taxes in Harrisburg for the next five years. The proposal, which was developed by Reps. Greg Rothman (R-Cumberland) and Patty Kim (D-Dauphin), also would prohibit a commuter tax, or earned-income tax on non-residents who work in the city.

The city’s 2 percent earned-income tax on residents and $156-per-year local services tax on people who work in the city provides about $12 million per year in revenue.

The bill also authorizes the creation of a five-member intergovernmental cooperation authority that would be tasked with developing a financial plan for the city. The plan would need to account for the elimination of the higher taxation after five years.

Beginning in 2024, Harrisburg would be required to lower its earned income tax rate back to 1 percent, while the local services tax would decline to $52 per year.

“While I wish we had been able to achieve a permanent solution for the city and the region, Harrisburg’s immediate fiscal crisis has lifted,” Mayor Eric Papenfuse said in a statement.

With the legislative fix, Harrisburg officials won’t need to adopt a three-year Act 47 exit plan, which would have included big property tax hikes needed to cover the loss of the higher earned income and local services taxes.

Future tax increases are still possible, but officials are optimistic that the five-year window will give Harrisburg enough time to restructure its debts and bolster its tax base. Getting out of Act 47 should promote continued stability in the city, which could spark more private investments.

Jason Scott
Jason Scott covers state government, real estate and construction, media and marketing, and Dauphin and Cumberland counties. Have a tip or question for him? Email him at jscott@cpbj.com.

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