Could earned income tax help Neshaminy budget shortfall? Not this year.
The Neshaminy School District is facing a preliminary $3.62 million budget deficit for the 2023-24 school year if it doesn't raise taxes.
But a proposed earned income tax discussed at a recent budget meeting would need to be studied and put to voters in a referendum before it could be enacted. It wouldn't help the budget for next year.
How earned income tax in Neshaminy would work
An earned income tax would affect residents differently depending on where they live within the school district. The district would use the funds collected from an earned income tax to allow it to increase the homestead exclusions for eligible residents to give them relief on their property tax bills.
"This is a long term issue that needs to have months of planning, a commission appointed to study the issue, and only then if the district were to still want to do it, then it would require passage of a (voter) referendum. The issue is revenue neutral for the district, meaning that every dollar generated in revenue would be then used to increase the homestead exclusion," said district Business Administrator Donald Irwin.
Irwin said the homestead exclusion provides "senior citizens/homeowners real estate tax relief because every dollar raised via an EIT will be used to reduce the real estate taxes with the homestead exemption. So if you are a senior who owns a home and you are have a pension and receive social security, you would get a significant relief on your real estate taxes because that is personal income and not considered earned income."
Municipality, school district split earned income tax
The maximum earned income tax usually allowed in Pennsylvania is 1% and it should be split between a municipality and its school district, under terms of Act 32 of 2008.
Most municipalities in the Neshaminy district charge a 1% earned income tax which they would need to split with the school district, giving it 0.5%, but Middletown only charges 0.5%, so residents there would have to pay the additional 0.5% tax to Neshaminy.
Langhorne Manor Borough does not charge an earned income tax, so whether residents there would pay 0.5 or 1% to Neshaminy also would need to be decided. Residents who live within the school district but work in Philadelphia as well as those who just work at a business in the school district but do not live there would not have to pay an earned income tax to the district, under current state law.
Neshaminy may need to raise property taxes
But to make ends meet for next year, the district needs to either whittle down its $202.9 million in expected expenditures, and/or increase its tax revenue, which currently is bringing in $199.28 million, leaving the $3.62 million shortfall.
The budget will be taken up in greater detail at the May 3 business committee meeting and at the full school board public work session May 9 and meeting May 23. The meetings are held at 7 p.m. at Maple Point Middle School, 2250 Langhorne-Yardley Road in Middletown. Committee meetings begin at 6:30 p.m.
More: Neshaminy taxpayers voice concerns, support for new school plan at Maple Point
Irwin said the district's current millage rate is 171.23 mills or $171.23 for each $1,000 in assessed property value and it could raise real estate taxes up to 7.02 mills under state law before it would have to take the tax increase issue to the voters through a ballot referendun.
The budget discussed at the business meeting last month did not include financing for the new Maple Point site elementary school for which the district broke ground last week.
The district estimates that building, which will house 900 students and replace the Pearl S. Buck Elementary School, will cost approximately $51 million. That capital project has already been financed mostly through bond issues and possible use of reserve funds. The yearly cost for taxpayers was already calculated in last year's budget, so was not added as a new cost this year.
More: Neshaminy rejects bids for new school, but taxpayers are still facing a tax hike
This article originally appeared on Bucks County Courier Times: Neshaminy eyes property tax hike now, possible earned income tax later
