An increase of 0.5 points in Lancaster’s earned income tax, or EIT, is on the table as city officials prepare to introduce the 2025 budget formally to City Council next Tuesday.
On Thursday, the three bills that make up the city’s annual package of budget legislation were posted online: The appropriations bill and bills establishing the property tax and EIT rates.
The latter specifies a rate of 1.1%, up from 0.6%. Property taxes would remain unchanged, at 12.64 mills. One mill equals $1 per $1,000 of assessed property value.
Up to now, Lancaster’s EIT has been capped at 0.6% under state law. That is lifted as of next January under home rule, which city voters approved by referendum in the election earlier this month.
Because income tends to grow naturally over time, EIT revenues do, too, even when rates remain unchanged. Other home rule cities in Pennsylvania have been able to keep their EIT and property tax rates unchanged after an initial EIT hike; Lancaster officials have said the same could be done here.
Projections through 2035 of Lancaster city finances based on the enactment of an earned income tax hike of 0.3 percentage point (left) or 0.5 percentage point (right). Click each chart to enlarge. (Source: City of Lancaster)
At a budget presentation earlier this month, Director of Administrative Services Tina Campbell laid out 10-year projections based on EIT increases of 0.3 points and 0.5 points. At 0.3 points, she said, the city would be facing the need for a tax hike again in just a couple of years; at 0.5 points, on the other hand, it should be able to reach 2035 with a reasonable fund balance and no additional rate increases.
At 1.1%, the EIT would be 83% higher than now. Residents earning $60,000 a year, roughly the city median, would pay an additional $300, their EIT rising from $360 to $660.
Emails to Campbell and Council President Amanda Bakay seeking comment on the proposed EIT were not immediately returned Thursday evening.
Besides the city, the School District of Lancaster collects an EIT of 0.5%.
Lancaster’s draft 2025 budget is here, along with related information. City Council is scheduled to vote on the budget and tax rates at its meeting on Tuesday, Dec. 17.
