ALLENTOWN, Pa. — Allentown will change how it collects its emergency and municipal services tax next year, allowing it to be paid a little at a time, and will no longer count investment income toward the minimum earnings threshold.
City Council unanimously approved the changes Wednesday to bring the city s law in line with the latest state law that authorizes the tax.
It addresses a number of the issues that various people were upset about, Finance Director Larry Hilliard said.
The tax also was renamed the local services tax.
This is the third version of the law since Allentown started collecting the annual $52 tax last year. Like other cities, Allentown charges the tax to people who work in town for the cost of providing public services to them.
The tax raises more than $2 million a year, which city officials say otherwise would have to come from other sources, such as property taxes.
The first version of the law was thrown out by a Lehigh County judge because it lacked required legal language.
The city continued to collect the tax by passing a second version of the law, which also came under fire because of how it determined who must pay it.
The law said anyone earning less than $12,000 a year, based on total income from all sources, would be exempt. That meant all income, including investment earnings, would be considered.
Several people complained about having their investment income counted, arguing that the intention of the state law was to tax only workers, based on their earned income.
Hilliard said about 20 people had to pay the tax this year because investment earnings put them over the limit.
The updated law approved Wednesday says people are exempt if their total earned income and net profits from businesses total less than $12,000.
The law also for the first time exempts military reservists called to active duty during the year and veterans who served in a war or armed conflict, were discharged honorably, and were disabled during their service.
The tax used to be deducted all at once, often from one of employees first paychecks of the year. That also was criticized as unfair to people working part time or not earning a lot of money, because it substantially decreased one check.
The new law requires the $52 to be deducted on a prorated basis determined by the number of pay periods during the year. An employee who is paid weekly would have $1 deducted. An employee paid every other week would have $2 deducted.Hilliard said all of the changes mirror those approved by the state Legislature earlier this year, at the recommendation of state Sen. Pat Browne, R-Lehigh.