HONESDALE, PA — Members of the public packed the borough hall to protest Honesdale’s earned income tax proposal.

If carried into the 2024 budget, people who work in Honesdale will see one percent of their paycheck go to the borough government. The council voted in favor of the EIT, but it’s still not set in stone. The budget still needs to be adopted at a meeting later this month. After that, the council will have another opportunity to make changes in January.

Why an earned income tax?

Pennsylvania law allows municipalities to levy a tax on residents’ and workers’ income up to a maximum of one percent. According to James Hunt, director of governmental relations at Berkheimer Tax Innovations, boroughs and townships already levy such a tax.

Out of 2,560 municipalities in Pennsylvania, Honesdale is one of just 85 to forgo an EIT. If somebody lives in Honesdale but works somewhere that does levy an EIT, then that employee must pay the tax where they work.

“In 2022, there were 654 residents of Honesdale Borough who paid the tax where they worked,” Hunt said. “They paid a total of $138,209.40 in EIT to their working jurisdictions.”

He said if the borough were to implement the tax, that money would be returned here to the borough.

If adopted, Honesdale could instead be collecting tax revenue from non-residents who work in the borough.

Those who favor EIT often argue that by taxing the workforce, it takes the pressure off elderly and underprivileged homeowners who struggle to pay their property taxes.

Council member and finance committee chair Bill McAllister said that in 2024, the borough would expect to generate about $360,000 from EIT. If not for EIT, McAllister, said the borough would need to generate this revenue by increasing property taxes by 1.5 mills. Council president Michael Augello said this would mean a 25 percent increase from the previous year’s taxes.

This additional revenue is mostly needed for stormwater repairs, several council members said. Year in and year out, Honesdale has scrambled to address flooded streets, collapsed pipes, sinkholes and property damage from increasing rainfall burdening Honesdale’s decades-old infrastructure. For years, council members have discussed the need to get ahead of these issues, but the sheer cost has so far proven insurmountable.

Residents say no

Honesdale has considered implementing an EIT before, when drawing up a budget toward the end of 2021. But many residents turned out and implored the council to drop it. This year, some of the same people showed up, with the same arguments.

Thomas Shepstone has a management and consultant company in the borough. He called the EIT an “insidious” tax that “spreads like a cancer” and goes “after the working families.”

“You only get a short-term benefit out of this,” he said. “The other municipalities — Hawley Borough, Dyberry Township, Texas Township, Waymart Borough, whoever they may be—they’ll decide, ‘Well if Honesdale can do it, we can do it.’”

Brian Wilken, president of the Greater Honesdale Partnership, said he was speaking on behalf of the partnership’s members in opposing the EIT.

“A one-percent tax makes it even harder to attract good employees at your business. It makes it a little more difficult to find those people that you need,” he said, adding that employers will have to make up for their employees’ losses.

Wilken recommended some alternatives, such as asking the borough’s tax-exempt nonprofits to make payments to the borough in lieu of taxes. He also recommended a strategic planning program from the PA Department of Community and Economic Development.

Several employers from the borough also showed up in opposition. Jill McConnell, owner of Finders Keepers Consignment Boutique and Memory Lane Photography, said that the EIT would be one more obstacle the council has put in the way of running a local business over the years.

“We started with one-way traffic, [which] made it harder as a business to maintain a customer base,” she said. “Metering, parking, ticketing has made it more difficult for operations as a small business. And now we’re talking about one more reason it’s going to be a little bit harder, a lot harder.”

Councilors weigh in, vote

After residents said they’d prefer seeing their property taxes go up than face an EIT, James Hamill countered that members of the public not in attendance likely cannot afford to see their property taxes rise significantly next year.

He said there are “folks here tonight who own property, and reside here, and work hard… who can foot that bill. But we definitely have some people, who are not here tonight, who can’t. My wife does aging in place for the county and goes into some homes that are really struggling. I mean, needing roofs.”

Council member David Nilsen voiced his opposition to both wage and property taxes.

“It seems like changing the tax to property tax is only kicking the can,” he said. “How is it any different? I’m very no tax, I believe that tax is theft. I don’t believe in tax at all. I might be a nut job. But I don’t like tax, I think tax is worthless.”

McAllister eventually made a motion to scrap the EIT idea and opt for a higher millage rate instead. Augello and McCallister both voted yes. However, the motion failed when councilors Tiffany Rogers, Jason Newbon, Nilsen and Hamill all voted no.

McCallister then made a motion to move forward with EIT. On that, Nilsen and Newbon still voted no, but the remaining council members voted yes, and the motion succeeded. Many residents left the meeting in frustration.

After the council unanimously voted to tentatively adopt the budget, Hamill said to the remaining members of the public that the council needs to improve its communication with the public about these issues.

“It’s really important for us to do a better job of what’s in the budget,” Hamill said. “I think you’re owed more than what you’re getting in this budget process.”

The council will vote to officially adopt the 2024 budget at its next meeting at Borough Hall on Monday, November 27, at 6 p.m.