On January 7, 2013, the Commonwealth Court upheld the
longstanding "super credit" system in a decsion with
implications for a number of Berks County taxpayers.
See
Berks Cty. Tax Coll. Comm v. Pa. Dep't of Community and Econ.
Dev., No. 378 M.D. 2012 (Pa. Commw. Ct., Jan. 7, 2013).
The super credit applies to taxpayers living outside Philadelphia
that maintain two jobs - one inside Philadelphia city limits, and
another outside. (The same principal applies to taxpayers
working from separate offices within the same company - i.e.,
Philadelphia and a suburban office.) Historically, these
taxpayers have used Philadelphia's hefty city wage tax as a
credit to offset their local tax liability, oftentimes eliminating
the need to pay an earned income tax ("EIT") to their
local municipality and school district.
The plaintiffs, a number of tax collection committees of counties
located in the Philadelphia metropolitan area, including the Berks
County Tax Collection Committee (collectively, the
"Committees"), filed a motion with the Court seeking
relief in the form of a declaration that the super credit system
violates the Uniformity Clause of the Pennsylvania
Constitution. The Committees further asked the Court to ditch
the super credit system in favor a system of
apportionment.
President Judge Dan Pellegrini, writing for the Court, rejected the uniformity challenge and upheld the super credit system. Quoting its prior holding in Somma v. Commonwealth, 405 A.2d 1323 (Pa. Cmwlth. 1979), the Court held:
[W]e also recognize that 'reasonableness' is the standard by which classifications created by a taxation provision are judged and that the legislature ha[s] broad discretion in choosing acceptable categories.... [W]hen petitioners question the reasonableness of having to pay the sum of two taxes imposed by different authorities while others pay only one, they are not questioning the uniformity of the taxing provisions but rather the sense of fairness within the legislature which, by authorizing a local wage tax, permits the imposition of two separate and distinct taxes on one income. Two separate taxing schemes superimposed one upon the other do not create impermissible, unconstitutional inequalities; nor does recognition of credit for taxes paid to some other governmental authority.
Id. at 9-10. The Court further cited the General Assembly's rationale for the system as a means of encouraging non-residents to "continue working in Philadelphia and to continue to voluntarily subject themselves to an increased EIT rate rather than moving their workplaces to the surrounding municipalities whose EIT rate is a fraction of that imposed by Philadelphia." Id. at 10. Taxpayer advocacy groups welcomed the decision, viewing it as a win for taxpayers.
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