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Biggest Local Government Revenue Hit from the Pandemic Expected to Begin in August
Largest Cash Impact Expected on Earned Income Taxes

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Earned  income tax revenue, the second largest local government tax source in Pennsylvania, is expected to be hit the hardest by the pandemic because it is tied to jobs.

The impact is likely to be felt the most in August, when municipalities receive EIT payments from April, May and June.

The impact will be uneven. Second class townships receive the most on average from EIT - over 46 percent of total tax revenue compared with approximately 30 percent for cities and boroughs. Home rule communities with higher EIT rates are also anticipated to suffer disproportionately. 

Another factor to consider: a municipality's residential mix is important to EIT revenue since certain industries like restaurants and retail have shed jobs while others are able to work from home. 

Other taxes likely to be effected are real estate transfer taxes and local services taxes, depending on local business closings within a municipality.

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Three Preventative Steps for Municipalities

 

1. Begin to plan now. By August, it will be too late.


 2. Preserve cash. Lost revenue is likely to severely impact the fourth quarter when hefty year end payments like pension and tax anticipation notes are due. 


 3. Consider investigating a drawdown line of credit. Talk to your bank lender now about options and timing. Avoid the potential August and September rush to look for credit options.
An Independent, Nonpartisan Voice for Good Government 
The work of the Pennsylvania Economy League ranges from practical support for municipalities and school districts to independent public policy research on issues impacting state and local government.