Residents,
In the Fall of 2024, this board held four (4) publicly advertised Budget Work Sessions from September through November to discuss options for the 2025 Township Budget. In addition, the Board of Supervisors published articles in the township newsletter to garner public input and to be transparent. The Spring/Summer edition of the Township Newsletter included an article about “Township Services and Taxes” that you would have received in June. The Fall/Winter 2024 edition had an article on the first page titled “Proposed Tax Increases For 2025 Township Budget” that you would have received in November. I have reattached them for your convenience, along with the following link to the Township website where the newsletters may be found: https://www.eastmarlborough.org/township-newsletter/.
For 2025 budgeting purposes, the Township Board of Supervisors reached a point where there were no remaining township funds to draw from, as was done in the past to supplement the Fire & Emergency Services Fund, which provides the township’s municipal obligation to the Kennett Fire and Emergency Services Regional Commission (KFESRC). This board raised the ES and Fire taxes to meet its 2025 municipal obligation to the KFESRC, which was legally required (i.e., Intergovernmental agreement, PA 2nd Class Township Code) as follows:
- Emergency Services Tax from 0.075 mills to 0.5 mills**
- Fire Protection Tax from 0.675 mills to 2.25 mills**
- General Purpose Tax from 1.05 mills to 1.75 mills
- Library (0.183 mills) & Open Space (0.2 mills) Taxes unchanged
**A total of 2.0 mill. increase for the Fire & Emergency Services taxes to generate the necessary revenue for the Township to meet its 2025 municipal obligation of $1,393,932.51 and its first quarter payment for 2026, which could be a township obligation of $1.65 Million, based on historical annual increases, to the KFESRC. The total millage for the Fire & Emergency Services Fund is 2.75 mills (56%) out of the total 4.883 mills levied in 2025.
This Board also increased the General Purpose Tax from 1.05 to 1.75 mills. The additional money generated from the increase will be transferred from the General Fund to the Capital Improvement Fund to continue capital planning projects (e.g., roadway maintenance/replacement, bridge repair/replacement, and fleet management). The Township did not have a Capital Improvement Plan until 2023. The 1.05 millage for the General Purpose Tax has not increased since before 1996, while township services have increased in relation to population and infrastructure growth.
The Township has been working with the Kennett Fire and Emergency Services Regional Commission (KFESRC) to obtain better financial data, which continues to be in progress. The graph below shows that the township’s obligation to the KFESRC has increased 175% since 2021. As of this email, the KFESRC has not identified a ceiling date and/or monetary amount sufficient to sustain services for an extended period (5-10 years) to aid municipalities in fixing justifiable tax rates.
The graph is from the 2024 Budget Message; the ‘2025 Projected’ was accurate (175% Increase from 2021 to 2025)
For 2025, the Township Board of Supervisors has made two (2) standing agenda items on their meeting agenda under Continuing Business: 1) Kennett Fire & Emergency Services Regional Commission – Monthly Update, and 2) Discussion and Comprehensive Look and Approach to the Township Taxation Process. The Township Board of Supervisors is actively discussing whether an EIT is the appropriate course of action to supplement revenue and possibly reduce and/or eliminate some of its local taxes. If the Board of Supervisors were to implement an EIT for collection to commence in 2026, it would have had to adopt an ordinance by its October 2024 meeting, which would be publicly advertised before any adoption. The Township Board of Supervisors looks at all facets of the Township’s demographics/tax base (e.g., retired, of retirement or nearing retirement age, working class), township services provided, and where the township will be 5 years and 10 years from now.
The Township Board of Supervisors meets on the second Wednesday of each month at 7:00 p.m. at the municipal complex, 721 Unionville Road, Kennett Square, PA 19348.
Earned Income Tax – Township Overview
Click to download a copy of the EIT Overview
Why is the Township Board of Supervisors considering an Earned Income Tax (EIT) starting in January 2026?
As costs have increased in recent years for all Americans, expenses have also increased for the township government of East Marlborough in the following areas: utilities, maintenance, fire and emergency services, and capital expenditures.
What is Earned Income Tax (EIT)?
Under Act 511 of 1965, Pennsylvania municipalities and school districts have the legal authority to levy a local Earned Income Tax (EIT) on individuals’ gross earned income/compensation and net profits up to 1%. EIT is separate from the Pennsylvania personal income tax. In most cases, when the place of residence and employment both have an EIT, the person pays the EIT where they live. They are not taxed twice.
Is EIT a new tax?
It is new to East Marlborough Township but has existed since 1965 throughout the state. 94% of the municipalities in the state, including 70 of 73 municipalities in Chester County, use the EIT as a revenue source.
What types of income will be taxable?
EIT is levied against a person’s earned income or net profits. Taxable income includes salaries, wages, commissions, bonuses, tips, stipends, fees, incentive payments, employee contributions to some retirement accounts, jury duty pay, military pay for services other than active duty, and sick pay.
What types of income are not taxable?
EIT is not levied on Social Security benefits, unemployment, public assistance, alimony, child support, death benefits, gifts, interest, dividends, lottery winnings, Supplementary Unemployment benefits, capital gains, disability benefits, active military service, and summer encampment, pensions and individual retirement programs (such as Keogh, Tax Shelter Annuity, IRA and 401K) and some other non-taxable earnings. These sources of income are exempt from EIT.
How will the tax be collected?
For most people, the tax will be withheld from their paycheck by their employer, just as the state and federal income taxes already are.
What if I work in the state of Delaware?
It is also likely that some of the Township’s residents work in the State of Delaware, where they are subject to that state’s income tax. A resident who works in Wilmington is also subject to Wilmington’s local income tax. Pennsylvania residents who pay their income tax to Delaware (and Wilmington) are permitted a credit on double-taxed income.
How will a 1% EIT impact me as a resident of East Marlborough Township?
Based on the most recent tax data available, Keystone estimates approximately 1,100 East Marlborough Township residents already pay the tax because they work in taxing jurisdictions that currently levy the earned income tax. These figures include only those East Marlborough Township residents who commute to work in a taxing jurisdiction where Keystone is the Act 32 Tax Officer (in this instance, Bucks, Chester, Delaware, and Northampton counties). Those residents who work in Montgomery County are not included in these estimates, as the Keystone Collections Group is not the Act 32 Tax Officer there.
A reported 1,144 residents of East Marlborough Township that work in communities where Keystone is the collector paid nearly $713,026.32 to these other communities in non-resident EIT taxes in 2023, the latest year for which figures are available. Virtually all this revenue would revert to East Marlborough Township if the Township imposed the 1% EIT tax in addition to the other EIT revenue sources.
In most cases, East Marlborough Township residents working in communities that levy the non-resident tax where Keystone is the collector would see no increase in their current local earned income tax payments.
If you are a resident who works in another Pennsylvania municipality that levies at a 1.0% EIT, you already pay this tax to your workplace municipality. You would not see a tax increase – instead, your taxes would go to East Marlborough Township.
An employer is to submit both the resident local taxes and the non-resident local taxes (i.e., work location); they are to withhold the higher of the two tax rates and submit the amount withheld to the Tax Administrator.
The Tax Administrator will then remit the taxpayers’ funds first to the resident municipality, and the remainder of funds withheld, if higher than the resident rate, will be applied to the non-resident (work location) municipality.
If an East Marlborough resident works in the City of Philadelphia, they will continue to pay the City’s EIT rate and not see a tax rate change. By state law, the City of Philadelphia continues to receive that tax revenue, and East Marlborough would not collect EIT from them.
East Marlborough residents who do not have an earned income would not be affected. This includes anyone whose sole source of revenue comes from Social Security benefits, pensions, unemployment, and other non-taxable earnings, as listed above.
The law permits municipal taxing authorities to concurrently enact a non-resident, or commuter tax, on individuals who work in one taxing jurisdiction but live elsewhere. Most municipalities that enact the earned income tax throughout Chester County also impose non-resident tax.
Most Chester County municipalities (i.e., 70 of 73 municipalities) levy the EIT and concurrently impose a non-resident rate of 1%. The same applies to communities within Bucks, Montgomery, and Northampton counties.
Therefore, enacting a concurrent non-resident EIT may generate additional revenue for East Marlborough Township only from those Pennsylvania residents of nearby communities who work in the Township but live in taxing jurisdictions that do not impose the EIT.
How much revenue will EIT generate for the Township?
Data suggests that the maximum revenue that East Marlborough Township could receive from a 1% EIT is approximately $3,745,000.00. Conversely, if the Township implemented a 0.5% EIT, it would receive an estimated $2,110,000.00. Because residents work in Delaware and Philadelphia and several are retired, the amount collected would be less than that stated amount.
In 2023, East Marlborough residents who reside in the Kennett Consolidated School District paid EIT for $889,812.95, of which if the township had an EIT, it would have received half the EIT, totaling $444,906.48.
Currently, the Unionville-Chadds Ford School District does not impose a local earned income tax, which allows the Township to set its rate at the statutory maximum of 1%. The school district may impose its EIT up to 0.5% by state law. With the statutory maximum rate of 1%, the Township would be limited to a 0.5% rate. The Township is reviewing these options with the Township solicitor.
Meetings on the EIT
East Marlborough Township will have information on the EIT at its monthly meetings and the township website.
Thank you,
Township Board of Supervisors
East Marlborough Township