Progressive Budget Decision re Earned Income Tax

At times misunderstood when campaigning, I often suggested that the township needed to explore Earned Income Tax (EIT) as a possible revenue source.  There was (and continues to be) a lot of inaccurate information circulating about Earned Income Tax.  An example of misinformation occurred at the last Board of Supervisor Meeting, when Supervisor Chair Warren Kampf indicated that those individuals who lost their jobs would pay Earned Income Tax (if Tredyffrin were to have an EIT).  I hope that Mr. Kampf did not intentionally try to confuse the public with his words;  the fact is that individuals receiving unemployment benefits would not pay Earned Income Tax; unemployment benefits are not subject to EIT.

I thought it might be useful to list examples of income which are not subject to Earned Income Tax:

  • Retirement Pensions
  • Disability Payments
  • Active Military Pay
  • Unemployment Compensation
  • Insurance Proceeds (non-business)
  • Workmen’s Compensation  
  • Bequests
  • Stock Dividends (non-business)
  • Gifts/Lottery Winnings
  • Social Security
  • Interest (non-business)
  • Military Bonuses

Earned Income Tax is based on gross wages, salaries, commissions and other earned compensation. As stated numerous times, approximately $3 million is being paid to other municipalities by Tredyffrin residents.  If an EIT were in place, this revenue would return to the township.  Dave Brill, Township Finance Director, has offered that the potential township revenue could be as high as $8 million (should Earned Income Tax be instituted). 

Assuming that we get through the township budget discussion on December 21 with the proposed draft budget more or less intact, I still contend that the 2010 budget is nothing more than a Band-Aid solution to a far greater financial problem.  I believe that the township will limp along through 2010 with the budget in place.  However, without financial foresight, this time next year the township will be faced with a far greater problem than the reinstatement of $20K to the Fire Department.  The 3 new supervisors all campaigned (and were elected) on the ‘no new taxes’ mantra and they will probably take office on January 4 with that promise intact.  However,  it doesn’t take my London School of Economics education to believe that their promise will be short-lived.  Financially the township is in a very precarious financial situation and we are going to witness firsthand the result of shortsighted financial planning.

I know that this posting of Earned Income Tax discussion will bring opposing comments, and I actually encourage the dialogue.  Tredyffrin’s 2006 Tax Study Commission and voter referendum overwhelmingly were against imposing an EIT.  Warding off that particular argument, clearly 2010 can not possibly be compared economically to 2006; it is a vastly different financial climate facing this township.  I may have been one of the voters in 2006 who opposed an EIT; believing that the township at that point did not have severe financial needs to warrant that taxation approach.  However, if in 2009 this township’s annual budget of $37 million can not fund $20K to our firefighters, something is dramatically different in this current picture.  Each and every taxpayer needs to take a careful look at the proposed 2010 township budget — I believe the future is going to require more than simply tightening our belts as has been suggested by some of our township leaders, as a response to our economic problems!

I came across an interesting article from December 11 concerning the borough of Yeadon, Delaware County — a community located close to the Philadelphia Airport.  I pulled up the demographics to compare Yeadon with Tredyffrin; as you can see they are vastly different.  The median income of Yeadon is approximately one-half the level of Tredyffrin, with 3 times the number of people living under the poverty level.  The point of the comparison is that Yeadon is making a progressive budget decision for 2010 and instituting an Earned Income Tax!  The borough manager believes the move will diversify the tax base and help the seniors stay in their home (the EIT will reduce their property taxes).  I have no idea what the average education level is in Yeadon, but I’m going to make a broad guess and bet that it is far lower than the average Tredyffrin resident.  Why do you suppose than that Yeadon’s leadership was able to conclude that the severity of the economic situation required an Earned Income Tax?  I am  guessing that paying an additional 1% tax to residents of Yeadon is going to be a lot more difficult than a similar tax would be to Tredyffrin residents.  It’s probably a safe assumption that our average Tredyffrin taxpayer is in a far better financial situation than a Yeadon resident. I salute Yeadon Borough for analyzing their economic climate and making this progressive budget decision.

Below is a demographic comparison of Yeadon vs. Tredyffrin with the article concerning Yeadon’s progressive 2010 budget decision. 

Demographics of Yeadon, Delaware County:  As of the census of 2000, there were 11,762 people, 4,696 households, and 2,967 families residing in the borough. The median income for a household in the borough was $45,550, and the median income for a family was $55,169. The per capita income for the borough was $22,546. About 14.6% of the population were below the poverty line.

Demographics of Tredyffrin Township, Chester County: As of the census of 2000, there were 29,062 people, 12,223 households, and 7,834 families residing in the township. The median income for a household in the township was $90,915 and the median income for a family was $121,809. The per capita income of the township was $47,584.  About 3.7% of the population was below the poverty line.

Yeadon Adopts EIT, Decreases Property Taxes

Published: Friday, December 11, 2009

YEADON — Officials will end the year with two bold financial moves.

Council voted 4-0 Monday to impose a 1 percent earned income tax, expected to channel about $900,000 into borough coffers annually.

While municipalities often adopt EITs to close looming budget shortfalls, Interim Borough Manager Paul Janssen said he recommended it as a means of diversifying the tax base.

“Seniors have to pay property taxes like crazy to be able to stay in their house. If council can shift this to an EIT and add a property tax cut it has huge benefit to seniors.” And “They get a tax source that grows.”

Officials plan to use the new tax to decrease property taxes by 1 mill, lowering the rate from 9.89 to 8.89 mills, about 10 percent. The reduced rate had been advertised and is scheduled for adoption Dec. 17. The EIT will also eliminate need to dip into the borough’s fund balance. Janssen said Yeadon had a balanced budget, but it included $197,000 from reserves.

Said Vice President Jack Byrne, “The EIT will generate more revenue for the borough and we’re going to reduce taxes. We have a lot of seniors here and it’s going to be helpful for them.”

Byrne noted that many residents who work outside the borough already pay the EIT, but to the municipality where they work. Adopting an EIT will allow Yeadon to capture those monies.

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18 Responses

  1. Guess I’ll start the discussion –

    1. You and many others seem to favor an EIT over a PIT. Guess we’ll just throw another tax on the working person, while exempting the others and cutting their property taxes to boot. So if I’m retired and have a pension, interest, and dividends of $100,000, no tax on my income and my property taxes go down a bit. If me and my wife bust our rears to make $100,000, we get rewarded with a new $1000 tax and a small reduction in property taxes. Fair?

    2. Your demographic data reveal that there are 12,223 households in the township. If the fire departments could get $2 from every household, they’d have their $21,000.

    3. No offense, but is Yeadon a model community and should we be looking to them for cues on how to manage our Township finances?

    • Mike —
      You are right — if we could get every household in Tredyffrin to contribute $2, the fire company would have their $21K. However, as we all heard loud and clear by a number of individuals (including Bill DeHaven) at the last BOS meeting, people are not giving to the fire company.

      I don’t believe that I set Yeadon up as a ‘model community’. Obviously, you did your research — Yeadon is a poor, crime-ridden area (in fact, I discovered that the Mayor got her borough on the list of Mayors in favor of removing from “guns from the streets’. However, I think the economic situation of Yeadon is exactly the reason that the comparison to Tredyffrin is so striking. With high unemployment, crime, and poverty the Philadelphia suburb of Yeadon is thinking beyond a quick-fix in their 2010 budget planning. I’m also going to take a wild guess (based on their cime record) that Yeadon is not cutting police or fire department contributions from their 2010 budget. I tried to find their budget online or an email address for the borough but unfortunately was unable to find the information.

      I really don’t ‘favor’ an EIT — actually, I’d be really satisfied to see us remain ‘status quo’ in Tredyffrin, but that simple isn’t possible. Given the choice of cutting fire department contributions, library funding, and other services to a point of near nonexistence, than yes, we better look at making some changes (even if that means in the form of a tax increase). Do you really think that this township is going to survive beyond 2010’s budget without a tax increase? How much more do you think that the budget can be cut for the following year, should we struggle through 2010?

  2. For what it’s worth, in the ’08 election Yeadon Borough went:

    5898 Obama
    271 McCain

  3. Pattye:

    An example, when some of the budget cuts were announced earlier this fall, they included the leaf collection site on Cassatt. I understand there was a large number of complaints to Supervisors and the Township. So Mr. Bryan Baynard, a local resident, volunteered to open the facility for two Saturday afternoons with the help of a couple of other volunteers. You can either complain about the problem or be part of the solution.

    At the past 2 BOS meetings, a bunch of people stood up to complain about the Fire Department cuts. The fire departments’ plight has been widely covered in the local newspapers. Obviously, the community is much more aware that the local fire departments have a funding shortfall. However, in all their time at the microphone, did Eamonn or Matt or Ethan Norris ask for help from the citizens? No. Bill DeHaven said, “People don’t give.” – what a defeatist attitude. Be part of the solution!

    • Mike –
      These volunteer fire fighters are already risking their lives for us (not to mention the countless hours of volunteer time) — are they now to also fundraise? Besides, I’m guessing that they already do just that — I know that we live in the Paoli Fire Company’s jurisdiction and annually receive support ‘ask’ letters. I don’t know if Bill’s attitude was so much defeatist, as more of ‘reality’. He’s been involved with the fire department a lot of years, and I have to believe that he knows what he’s talking about.

      Don’t get me wrong, I think it is wonderful that Bryan Baynard stepped up to the plate and has the compost center open a couple of Saturdays. I’m not taking anything away from him — but jeez, that is not exactly in the same league with being a fire fighter, is it? But there is a point about other needs that the township may have (not volunteer fire fighting) — perhaps there could be a dedicated page on the township website that lists current volunteer needs and contact information. The list is then posted at several BOS meetings so that more people are aware of its existence and if a resident has some time and talents to spare, they are directed to this list of opportunities. As an advocate of community volunteerism, I would definitely support that idea, esp. as away to fill in some of the gaps until the economy rebounds.

  4. I’m not suggesting that they go door-to-door with a tin cup, I’m just wondering why they don’t use a little bit of their time at the mic asking the community for financial help. Almost makes me wonder whether the secondary priority is to set up Eamonn’s next run for supervisor ;).

  5. It’s almost funny. Bryan Baynard get’s more credit for 2 days of shoveling compost for a bunch of whiners than he does for being a volunteer firefighter for the last 10 years!

    As a possible fundraiser, the fire companies can put snow plows on the fire engines and plow the township roads in exchange for township funding! It might even go quicker if they use their lights and sirens!

    We can also have them volunteer at the libraries too, except they’re just dumb firefighters, they can’t possibly read.

    I know! Lets have them run the compost pile and hope that they don’t get shit on anymore. That last one sounds like a winner.

    Mike, You should probably take some of your own advice. If you are so interested in being part of the solution regarding fire department funding. I suggest you apply for membership at one of these organizations and become truly familiar with their operation. I would bet your opinion would significantly change.

    Three cheers to defeating the defeatist attitude!!!

  6. Mike – let’s not lose sight of an important fact in the fire/EMS funding issue. As a second class township it is the affirmative duty of the TOWNSHIP to provide emergency services. More specifically the supervisors have this obligation. The fire companies solicit funds from the community throughout the year as well. Therefore, when you see me, Eamon, Ethan or any fire company representative at the microphone we are advocating for municipal support, support which assists us in fulfilling the township’s statutory obligation to provide these services to the residents of Tredyffrin (and Easttown). Please understand this township support accounts for less than a quarter of our budget. Your comments regarding public support are appreciated and I am always grateful for private support. However, keep in mind where the ultimate responsibility lies for supporting these services.

  7. One thing that’s notable in all these heated internet debates is the tendency of commentators to analyze the marginal change as though it applies to the whole. An EIT means that retired property owners get a free ride. A 5% reduction in Township contributions for firefighters in 2010 means that the township and its citizens don’t support the fire companies. Stopping FLES means that we don’t want our kids to be global citizens. Restraining runaway teacher compensation means we don’t want our kids to get into college.

    What happened to “fair and balanced”?

  8. Well said, Ray.

  9. Pattye: Your knowledge of the political and internal borough affairs are TOTALLY lacking. You stated: “Why do you suppose than that Yeadon’s leadership was able to conclude that the severity of the economic situation required an Earned Income Tax?” Well here are some FACTS for you: Yeadon’s budget is in far better shape than most towns in PA. Weeks BEFORE the EIC tax was passed Standard and Poors upgraded us from “A-” to “A+”. One of only 29 towns in PA that were UPGRADED at all. FUTHERMORE, we were one of only 5 in the state that went from “standard” to “good”. This TAX was passed by a LAME DUCK Council, under the DIRECT support and direction of the interim Borough Manager Paul Janssen, who comes with lots of political baggage. His tenure in Coatesville and Norristown was riddled with issues, from leaving Coatesville $7 Million in debt to costing $170,000 to Norristown Taxpayers for his “mistake”. Our township SIMPLY DOES NOT NEED THIS TAX. We believe that Janssen is quite possibly a perfect example of who and what NOT to let happen to your town. That is why on March 18, 2010 we will be delivering petitions to repeal this tax and gathering a group to go to the meeting in support of it’s repeal. For we are aware that once government gets it’s greedy hand in your pocket, it rarely takes it out. Additionally your statements assuming education level, crime and income are almost racist, esp since you took the time to get some stats, but not all. We are not a “poor, crime ridden area”. No more thatn others, that is anyway.

    • Yeadon Community News, Wow. Thank you for your comment. So as to avoid confusion, Yeadon Community News is commenting on a posting from 3-months ago, December 13, 2009 Progressive Budget Decision re Earned Income Tax. I must say this is the first time in my life (to my knowledge) that anyone has ever referred to me as ‘racist’ or rather ‘almost racist’. Please let me set the record straight — I do not have thorough knowledge of the political and internal borough affairs of Yeadon — absolutely do not. Thank you for setting the record straight if there was any incorrect information on Yeadon, Delaware County demographics.

  10. Thank you for “setting the record straight” in your thoughtful reply.

  11. The tax reduction that was put through is just a sham piece of political magic. When the math is done, almost everyone pays MORE when the new EIT is factored in. Only seniors, the disabled and people who already pay at least 1% to the town in which they work (if they are property owners here in Yeadon) will truly see a minute savings. Many of the business owners here in town that I HAVE PERSONALLY SPOKEN to would gladly pay more property tax as opposed to the NET PROFITS TAX for businesses of 1% that is included in this EIT.
    At the March 1st meeting I told Council I had no problem if they wanted to create some fund to give the seniors the whopping $110-$150 tax rebate that they would have seen with this tax cut. $150 is not the “HUGE” reduction to senior taxes that Janssen USES TO SELL this tax burden. His MATH DOES NOT WORK!!!!!!!

  12. It is important for you all to understand that as part of the EIC tax unincorporated businesses ARE SUBJECT TO A 1% NET PROFITS TAX. With today’s economy and the skimpy margins small business owners run on 1% can scare some off. Many businesses here in town say they may leave if the tax is not repealed, hurting the tax base further. Leaving more buildings derelict. So be sure what you are getting yourselves into with this seemingly ‘HOT IDEA’ you have going there.

  13. PS: Yes, we have a HUGE PROBLEM with this Wm Penn School District. A topic I may get into more depth with sometime in the future. As I have no kids, it is easy for me to ignore that. But since it too comes from my pocket, in time I plan to dig into what’s going on there too.

  14. Full house for the Council meeting last night. More than 60 residents and business owners packed in to tell Council their thoughts on this new earned income tax. One resident stated he was “blindsided by this tax”. Speakers drew cheers and applause from the citizen audience for their words against the tax. We found out last night that, unfortunately, State Law requires that the law stay in effect for 1 year. It can be “withdrawn or repealed” for next year though! Council was told that if they did not repeal it, they would be the ones labeled as the “TAX RAISERS” for doing literately nothing! The small vote difference for the Mayor and the fact the new Council members ran unopposed was brought to their attention. They were warned that those facts will be dramatically different as a result of their IN-ACTION. Yeadon Community News will be keeping their feet to this PARTICULAR fire all year long, till they vote to repeal!!!

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