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2020 Proposal to Increase the Earned Income Tax

Township Proposes to Increase the Township’s Earned Income Tax

As part of a comprehensive effort to address the Township’s financial challenges in a manner which is both equitable and avoids unduly burdening residential property taxpayers, the Cheltenham Township Board of Commissioners is proposing to increase the Township’s share of the Earned Income Tax (EIT) up to an additional 0.5%.

Currently, a 1% tax is assessed on the wages of all Township residents, with the exception of those who work in the City of Philadelphia. Residents who pay the City Wage Tax are exempt from paying the Township’s EIT. Currently, one half of 1% of the EIT goes to the Cheltenham School District and the other half of the 1% EIT goes to Cheltenham Township.

Why the Township Board of Commissioners Is Proposing this Increase

This past year, Cheltenham Township received a State grant to study its current and projected financial situation over the next five years. The final Report was presented publicly at our June 17 legislative meeting.

Findings of that Report confirm serious financial challenges – ongoing and worsened by the COVID-19 pandemic – and make a number of specific recommendations to the Board and Community, which include expense reductions, operating consolidations, and selective increases in certain revenue categories.

Increasing the EIT is one of the most consequential of these recommendations. The EIT is levied only on the wages paid to those gainfully employed. For example, if you earned $50,000 in gross wages as per your W-2 form, your EIT obligation is $500 for that taxable year, of which $250 would be received by the Township. This equates to $9.62 added to your paycheck if you are paid every two weeks.

EIT funding represents both an equitable and more substantial source of revenue, with the responsibility to pay the EIT solely on those who are or were employed during the calendar year. The Board of Commissioners recognizes the growing burden that real estate taxes impose on residential taxpayers and the fact that Cheltenham Township’s real estate millage and special fees fall short of the financial requirements to enable the Township to deliver the essential services Cheltenham Township residents need and expect from their government.

The proposed increase in EIT:

  • Improves the Township’s ability to provide essential services.
  • Helps preserve Cheltenham Township’s quality of life.
  • Reduces the Township’s reliance on future real estate tax increases.
  • Avoids additional burden on seniors and retirees who do not earn wages.
  • Minimizes the impact on those who may have suffered a loss of employment due to the pandemic and other reasons.

The Board of Commissioners will likely consider an ordinance to increase the EIT this fall so any increases will take effect in 2021.

      Important Information

      EIT Fact Sheet

      Five Year Strategic Financial Management Plan (PFM Report)


      Meeting Canceled - Referendum no longer required when the Governor signed SB1188 into law on July 23, 2020.

      A Special Meeting of the Finance Committee and Board of Commissioners will be held on Wednesday, July 29, 2020, to consider an Ordinance that will initiate the referendum process to allow voters the opportunity to consider an amendment to the Township's Home Rule Charter to permit the Board of Commissioners to increase the Township's Earned Income Tax rate up to 1% [Meeting Notice] [Ordinance].

       
      Past Meetings

      July 23, 2020 EIT Town Hall No. 2
      Meeting Video
      PowerPoint Presentation
      Agenda

      July 14, 2020 EIT Town Hall No. 3
      Meeting Video

      PowerPoint Presentation

      Agenda

      July 8, 2020 Finance Committee Meeting
      The initial discussion on this topic took place at the July 8, 2020, Finance Committee meeting [Meeting Video].

       
       
       
       
       
      Cheltenham Township   ~   8230 Old York Road   ~   Elkins Park, PA 19027
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