Tax Burden of Taxpayers - 2010 Budget Message

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How does Lower Merion Township’s tax burden compare to surrounding comparable Townships?

In recent years, Township staff has monitored and evaluated the tax burden of eleven nearby large Philadelphia suburban municipalities to compare their various tax rates and mix to Lower Merion. Lower Merion’s 2009 rates are: 3.68 mills Real Estate Tax (RET); no Earned Income Tax (EIT), $47 Local Service Tax (LST); 0.5% Deed Transfer Tax (DTT), 1.5 mills Business Privilege Tax (BPT); 1.0 mill Mercantile Tax (MT). (State laws prohibit Lower Merion from raising its LST, DTT, BPT or MT rates.) Lower Merion also provided an approximate 19% subsidy in 2009 from its GF to its Solid Waste Fees for municipal rear-yard collection of refuse and recycling. ?

The following townships were reviewed: Abington, Cheltenham, Haverford, Marple, Montgomery, Plymouth, Radnor, Tredyffrin, Upper Darby, Upper Merion and Whitpain. ?

The analysis showed that only Upper Merion, with its substantial business tax base from the King of Prussia Mall and its many business parks, has a lower municipal tax burden (with no EIT and a lower RET) for its residents/citizens than Lower Merion Township. Upper Merion’s tax burden is among the lowest in the entire state. It can also be argued that Tredyffrin (Chester County) has a somewhat lower tax burden than Lower Merion as it also has no EIT and a lower RET. Tredyffrin, however, has double Lower Merion’s DTT and, like Upper Merion, has not subsidized their refuse and recycling services as their citizens pay full-market rates to private haulers.?

All of the studied Townships that assess the EIT (0.5% for municipality plus 0.5% for school district) are viewed to have a higher tax burden than Lower Merion due to the substantial tax impact of the EIT. A 0.5% EIT for the Township could possibly allow for the Township RET rate to be cut by more than half, and would allow for approximately $4 million in annual new GF revenue to be paid to the Township without any increase in taxes to Lower Merion residents by: (a) taxing non-residents from non-EIT-municipalities who work in Lower Merion and (b) “bringing home” EIT revenue now paid by Lower Merion residents who work in EIT-municipalities.?

It is also worth noting that nearby Whitemarsh Township and the Boroughs of Conshohocken and West Conshohocken all assess the EIT, and that the Borough of Narberth, which is fully contained within the borders of Lower Merion Township, had a 7.888 mills RET millage rate in 2009 – more than double that of Lower Merion.?

The analysis showed that Lower Merion Township’s tax rate burden is much lower than the norm and among the lowest in the region. Said another way, if Lower Merion had the tax rates and mix of these other townships, higher annual GF revenue would be generated by Lower Merion Township than is currently generated.?

Nearby townships, like Lower Merion, are also suffering from flat or declining revenue. Some are reducing services, laying-off some employees and appear to be headed toward no RET rate increases for 2010. Others will be forced to consider tax increases or invoke even larger service reductions. This is occurring in hundreds of municipalities throughout the country as the effects from 2008-2009 recession have strangled local and state governments’ ability to continue to provide core and desired services to their citizens. Unfortunately, most other governmental units were not as well positioned for this economic downturn as Lower Merion Township in their fund balance levels, cost containment strategies, and upkeep of their equipment and infrastructure.

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