Shikellamy school board to hold public meeting on occupational tax switch

Aug. 7—SUNBURY — Shikellamy taxpayers may soon have the option of voting to eliminate the occupational tax and instead have district residents pay a tax based on earnings.

The Shikellamy school board agreed to start the process by holding a public hearing so that residents can attend and learn the advantages and disadvantages of making the switch.

The occupational tax issue has come to light after the district sent out tax bills to Shikellamy School District college and high school students that left parents shocked to learn they would be paying an occupational tax.

School Director Slade Shreck said he heard from many members of the public and wanted to bring the issue to the board and request a public hearing so that the voters can make a choice.

The occupational tax, which is based on a person's profession, is unfair, Shreck said.

Shreck said if a person is listed as a "manager" as their profession and they make $25,000 per year, they pay the same tax as a "manager" who makes $200,000 per year.

"It's unfair and needs to change," Shreck said. "I feel this is something that nine people shouldn't be able to decide but instead let the taxpayers vote on which way they want to go."

The occupational assessment tax has long been considered an antiquated and often inequitable form of taxation. Most school districts in the region replaced it with an earned income tax more than a decade ago.

The authorization to eliminate occupational assessment taxes was outlined in Optional Occupation Tax Elimination Act 24 of 2001, and was later recast in Act 511 in 2008.

It allows school districts to use specified calculations to determine the earned income tax rate that would be assessed if the occupational assessment tax is replaced. Individuals would be taxed on what they earn, not a job title. School officials said the rate is about 1% of earnings.

Guaranteed revenue

The district would then guarantee they are getting their tax money because the fee would be withdrawn by employers, like income tax, whereas they have now had thousands of dollars in outstanding fees that may never be collected.

The last time the board voted on the issue was in 2015. With a 3-3 vote, the measure failed.

Selinsgrove, Lewisburg, Milton and Danville have all implemented the change, called Act 130.

Shikellamy Business Manager Brian Manning explained to the board Thursday that if the district were to switch to Act 130, there are some benefits and some disadvantages.

Manning said the way the system is set up the district would have to go back to 2009 tax assessments and that could potentially lose revenue for the district. Manning said the advantage is there would be no more occupational tax bill that comes in the mail.

The process

Manning said Act 130 would replace the way things are done now, not eliminate it.

Manning described to the board the process necessary to enact the change:

1. The board must pass a motion to advertise a public hearing. That advertisement must be in the newspaper for three consecutive weeks.

2. The board needs to hold a public hearing.

3. The board needs to pass a referendum question to be placed on the ballot.

4. The board then sends that question to the Board of Elections at least 90 days prior to the next election for it to be placed on the ballot.

5. The ballot question, to pass or deny the change, is decided by a majority vote.

6. Implementation would take place the following July in the subsequent year to the referendum question being approved. If the question is not approved, the system would remain unchanged.

Manning said if the process fails at any step, then the system that is currently in place for taxation would remain.

"Some will pay more and some will pay less," Manning said. "So there is a shift to individual taxpayers by changing the system."

Manning said the elimination of the tax is final and can't be reinstated.

Manning said the first year of the switch, if it were to happen, taxpayers would have to file for half a year under old earned income rate and half a year under new earned income rate for the year of implementation.

Employer compliance

Manning said employers would have to comply so that the tax then comes directly from paychecks.

"There needs to be an extensive employer information effort to ensure employers are withholding at the correct rate," he said. "Other districts have experienced cash flow impacts as the revenue shift takes time to adjust and ensure maximum employer compliance."

There are advantages, Manning said. The change would eliminate the one-time bill for taxpayers and creates a pay-as-you-go system.

Manning also said this gives the taxpayer the ability to pay based on income.

"Earned income tax is seen as a fairer tax by most," Manning said.

Other advantages are the new system would capture move-in and move-out working residents quicker than the current process, Manning said.

State Rep. Lynda Schlegel Culver said she has also heard from constituents that they believe the tax system could be fairer with everyone paying a percentage of their salary, rather than by a rate based on job classifications.

Culver said she believes in local control and the school board making the decisions because it is its own governmental agency.

The Shikellamy school board meets Monday night at 7 p.m. inside the administration building on Packer Island.