Swarthmore Borough drops income tax proposal after contribution from Swarthmore College

Swarthmore Borough is tabling a proposal to implement an earned income tax after Swarthmore College stepped up to cover a funding gap left by the closure of Crozer-Chester Medical Center.

Under a memorandum of understanding passed by Swarthmore Borough Tuesday, Swarthmore College will contribute $638,000 to the borough to help cover rising emergency service costs.

The contribution allows the borough to drop a proposal to implement an earned income tax, which faced pushback from residents and some members of borough council.

In a message to the community, Rob Goldberg, Swarthmore College’s vice president for finance and administration, said, “We’re happy we were able to work with the borough to avoid a new tax being imposed on College employees. We also value our long-standing partnership with the borough and remain committed to supporting the community we share. We’re grateful for the constructive dialogue that led to this outcome and for the continued collaboration that benefits both the borough and the College.”

In a presentation given last month, the borough projected a 1% earned income tax would bring in at least $3.13 million in the second year of collection (some collection lags would occur in the first year). This would include $760,000 to $1.5 million in taxes collected from nonresidents who work in Swarthmore.

An earned income tax is a local tax on salary, wages, and tips, but not on passive income like interest, dividends, capital gains, pensions, and Social Security benefits. These taxes are generally capped at 1%.

If a taxpayer lives in a community with an earned income tax, they pay into their home community’s income tax base. If their home community does not have an earned income tax and the community where they work does, they pay into their work community’s income tax base. One major exception is Philadelphia’s wage tax, which overrides local earned income taxes. This means if a person works in Philadelphia and lives in a suburban municipality with an earned income tax, they would pay Philadelphia’s wage tax rather than their home community’s earned income tax.

Cindy MacLeod, chair of the borough council’s finance committee, said the borough’s financial outlook is starkly different this year after the loss of Crozer’s ambulance services both increased the borough’s costs and brought down its revenue.

In April, the borough adopted a declaration of disaster emergency following the closures of Crozer-Chester Medical Center in Chester and Taylor Hospital in Ridley Park. The closures resulted in “significant impacts” to emergency services in the region, the declaration said, including burdening remaining medical centers and increasing wait times for patients.

According to preliminary estimates, the borough’s public safety costs are set to increase by 41% next year — from $3.1 million to $4.3 million. In addition to the loss of Crozer’s ambulance services, the borough is staring down steep fire equipment repair costs and a drop in the number of volunteer firefighters.

“The cost assumptions around all these emergency services is a real and meaningful change,” said councilmember Scarlett McCahill at a Sept. 8 meeting. “It’s not that all of a sudden, surprise, we weren’t minding the shop and now we’re really behind and need to do a catchup. The actual costs to the community have changed significantly.”

In addition to emergency service needs, Swarthmore officials say the borough has not been immune to more general inflationary pressures. Costs are rising for community services that the borough doesn’t want to cut, MacLeod said.

Though the earned income tax is off the table for now, the borough is considering implementing an emergency services tax, a specific type of property tax that would be earmarked just for emergency services.

“We hope we don’t have to do an emergency services tax, but we haven’t ruled that out,” MacLeod said.

Budget discussions will continue at the borough’s Oct. 27 finance committee meeting.

This suburban content is produced with support from the Leslie Miller and Richard Worley Foundation and The Lenfest Institute for Journalism. Editorial content is created independently of the project donors. Gifts to support The Inquirer’s high-impact journalism can be made at inquirer.com/donate. A list of Lenfest Institute donors can be found at lenfestinstitute.org/supporters.