Local Tax Measure to Be Reformed for 2007

Installment Withholding, Spending Restrictions Set by SB 157

The Senate today approved a compromise measure that makes significant reforms to the Emergency Municipal Services Tax, ending the lump-sum maximum payment of $52 and setting specific restrictions on how taxing entities may use revenues raised by the levy.

The joint Senate-House Conference Committee Report on Senate Bill 157 requires that tax, which would be renamed as the "Local Services Tax," be withheld on a payroll-period basis with a maximum deduction of $1 per week. Employers would be required to remit the LST collections on a quarterly basis.

The Conference Committee Report also specifically exempts those earning $12,000 or less per year from the tax.

Senate Bill 157 further restricts the use of the money for only the following:

Emergency services including police, fire and emergency medical services;
Road construction and maintenance;
Property tax reduction; and/or,
Property tax relief through the use of homestead/farmstead exemption.

Senator Pat Browne, R-16th District and the prime sponsor of Senate Bill 157, said the reforms included in the bill would provide relief for workers while ensuring that taxing entities use the revenues in a fiscally-responsible manner.

"Many municipalities adopted the Emergency and Municipal Services Tax at the maximum rate of $52 per year and withheld that in one lump sum, which created a tremendous financial burden for many lower-income workers." Senator Browne said. "Under this measure, low-income workers will be exempt and everyone else will see the tax burden reduced to $1 per week.

"Further, the Local Services Tax specifically states how taxing bodies may use the funds," Senator Browne continued. "The intent of the original bill was that the revenue was to be used for public safety and essential public works projects. This measure ensures that the money goes to those efforts or is used to provide property tax relief or reductions."

Senate Bill 157 also specifically ensures that individuals are liable for a maximum annual payment of $52, regardless of the number of jobs or work locations that the person may have.

Generally, the measure allows only the municipality/school district in which the employee is primarily employed to levy the LST. In cases of concurrent employment, the priority for collecting the tax would be:

Where the person is primarily employed or has his principal office;
Where the person resides and works; and,
Where the person is employed closest to his place of residence.