The City of Altoona may add a commuter tax soon to its array of revenue-raising tools, depending on recommendations of a coordinator the state will hire to draw up a distress recovery plan for the financially troubled municipality.
This earned income tax would apply to people who work in the city but live elsewhere, and it would be in addition to earned income tax they're already paying to their home municipalities, their home school districts and the city itself.
The commuter tax would probably be modest as a percentage, but for those earning big salaries, the amounts paid would be significant.
"Real money," said a local agency official who didn't want his name used.
For example, if the city levies a 0.2 percent commuter tax, one of Altoona Regional Health System's highest-paid employees - who earns $427,000 a year, according to the organization's IRS tax return - would pay $854 a year.
Advocates argue that the commuter tax enables municipalities to collect money for services provided to employers that workers - including those living outside the municipality - benefit from.
The city may levy additional earned income tax as part of its Act 47 Distressed Municipalities recovery plan because it is currently maxed out on earned income tax for general purposes, based on state law.
One aspect of that could be a "commuter tax" levied on residents of other municipalities who work in the city.
If the city levies a commuter tax, it would also need to levy a resident tax that is at least as high. Usually, the resident tax is higher, maybe by 0.1 percent.
Other elements of the earned income tax framework would remain the same if Altoona adopts a commuter tax.
Workers' home municipalities would still get 0.5 percent. Workers' home school districts get the other half percent.
Altoona also gets 0.2 percent from all its workers - resident and non-resident - under the state's distressed pension law, to be used only to support the city's pension plans.
Municipalities levy earned income tax on wages, salaries, commissions, net profits and other compensation. They don't levy it on corporate profits or investment income, according to newpa.com.
A sidenote: Home rule municipalities can't levy more than the regular 1 percent tax - shared 50-50 with workers' home school districts - on nonresidents. Thus, home rule municipalities can't levy a commuter tax. Altoona City Council members have spoken of a move to home rule as a way eventually to wean the city off of Act 47. Home rule can otherwise remove statutory caps on earned income and property tax.
Those employers, like Altoona Regional, enjoy the city's police and fire protection, the paving and plowing of streets, its code enforcement and zoning and planning services.
Without those services, the employers couldn't function and the workers wouldn't have jobs, the reasoning goes.
The Act 47 Distressed Municipalities Program the city recently entered allows municipalities to enact the commuter tax.
Currently, the 0.5 percent municipal earned income tax that nonresident workers in the city pay goes to their home municipalities.
The commuter tax would be additional, and it would go to the city.
According to several cities' Act 47 recovery plans, the commuter tax rate has varied between 0 and 1 percent.
In Chester, it was 1 percent in the mid-1990s, but has gone down significantly.
In New Castle, it started at 0.4 percent and decreased annually.
In Reading, it was 0.3 percent, and decreased annually.
In Johnstown, it was 0.2 percent in 2008, but it's been 0.1 percent lately.
City Manager Joe Weakland likes the idea.
"The people who are using our services, our infrastructure, our places of employment, who live outside the community [would be] paying for the use of these things, finally," he said.
Thursday's bank robbery in the city highlights the rationale for the commuter tax, said city controller A.C. Stickel. The police who answered the call didn't ask whether the tellers lived in Altoona, he said.
Still, commuter taxes are unpopular with those who must pay, said Gerald Cross, executive director of the Pennsylvania Economy League Central Division, one of the companies to which the state sent requests for proposals for the job of coordinating Altoona's recovery plan.
"People hate 'em," he said.
They hate the idea of paying tax to a jurisdiction where they don't live and can't vote, Stickel said.
They're also counter-productive, according to Sam Kamin, of Goldberg, Kamin and Garvin in Pittsburgh, another of the firms that got the state's Act 47 RFP.
"Politically, it sounds good," he said. But the people it hits hardest are entrepreneurs and others the city needs to thrive, he said.
It's not so much the amount levied, but "the principle," he said.
It discourages businesses from coming and drives existing businesses away, he said.
Favorable local taxation has helped to keep occupancy in a commercial corridor in Washington County near Pittsburgh around 100 percent, while unfavorable taxation has helped to create 30 percent vacancy in another corridor near the airport, he said.
"[The commuter tax] is legal, but that doesn't necessarily mean it's workable," he said. "[It's]a Band-Aid and not a very good one."
Still, there are restrictions on application of the commuter tax that render it less onerous, Cross said.
Municipalities in distress can only levy it if their recovery plans include it, he said. And they can only do it if they get approval from a county court judge, he added.
Permission is granted for a year at a time, he said.
And it needs to go for a defined purpose - usually for police cars or streets improvements or something that clearly benefits nonresident workers, he said.
"There are a lot of firewalls," he said. "It's not a permanent part of the landscape."
Mirror Staff Writer William Kibler is at 949-7038.