Judge Orders Harrisburg to Double Local Income Tax

September 10, 2012

Pennsylvania’s state capital of Harrisburg is one of a flurry of cities to enter bankruptcy protection in recent years. Done in by the accumulated $310 million debt from a 40 year trash-to-energy incinerator project, the city of just under 50,000 threw in the towel and sought restructuring in October 2011. The City Council, the Mayor, a receiver appointed by the Governor, the bankruptcy judge, and a team of forensic accountants are grappling through this process. (One of the more touchy moments was when the City Council approved a budget reduction over the Mayor’s veto, including defunding the Mayor’s spokesperson.)

The city’s structural budget remains unbalanced despite cuts, so Judge Bonnie Brigance Leadbetter approved a request by the bankruptcy receiver to order the City Council to raise the city’s local income tax, doubling the tax from 1 percent to 2 percent. (This is separate from the state income tax.) The higher tax will be in place for one year (but could be renewed by the receiver) and raise an additional $6 million. The City Council has opposed this effort, instead seeking the authority to tax suburbanites who work in Harrisburg. (Penn Live has been covering this story.)

Initially ordered to take effect within fifteen days of August 27, the judge has now postponed action until after October 4 oral arguments are held on a motion to reconsider.

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