Residents of East Marlborough Township may be facing an earned income tax. Supervisors are mulling over the idea, and Supervisors’ Chairman Ellen Sosangelis told the residents during the board’s April 23 workshop that the board will take several months before making the decision about implementing an EIT.

In a handout given to members of the audience, costs have risen for the township’s operations, including utilities, maintenance, fire and emergency services, and capital expenditures.

The purpose of the meeting was to learn what an EIT is, how it affects the township finances, and to hear residents’ opinions.

Jason Lawson from Keystone Collections, the tax-collecting group for Chester County, led off the session. He said earned income taxes are neither new nor rare.

“In Chester County, there are 73 municipalities, 70 of which already impose an earned income tax,” adding that EITs have existed in the state since 1965 and that 94 percent of the municipalities in Pennsylvania have an EIT.

In 1965, Act 511 was passed in the state. It allows municipalities to collect up to 1 percent of a person’s wages, salary, commissions, and all other active income.

“If you are employed, you pay the tax,” Lawson said.

However, an EIT doesn’t apply to pensions, social security, unemployment benefits, and some retirement plans.

The EIT is also separate from state and federal income taxes, though it, too, is withheld by the employer. It’s also separate from municipal and school property taxes, and from sewer and water bills, which are considered user fees, not taxes.

While the 1 percent max is constant, the calculation for collecting the tax is involved.

“As it relates to the nuts and bolts of collecting the tax,” Lawson said, “a Pennsylvania resident who resides or works in a community that has a local EIT, remits the tax at the higher of their resident rate — where you live — or work location rate.”

Things would be a little more involved in East Marlborough Township because some residents live within the Unionville-Chadds Ford School District, while others are in the Kennett Consolidated School District.

“People living in the Kennett Consolidated School District are already paying a 1 percent EIT that goes to Kennett…In the last audited year, that was roughly $889,000 from this portion of the school district. If the elected officials decide to assess a tax of 1 percent that will be halved, so Kennett will lose money…and approximately $445,000 will come this way,” Lawson said.

He also said calculations are based on whether a person is living in Pennsylvania but working in another state, such as Delaware or New Jersey.

Additionally, if an East Marlborough Township resident works in another municipality that has a 1 percent EIT, that tax goes to the workplace municipality. But, if East Marlborough enacts a 1 percent EIT, the money that had been going to that other town would go to East Marlborough, but the resident would be paying no more than he or she is already paying. However, if the resident works in the city of Philadelphia, Philadelphia will still collect the tax, but the resident would not be required to pay an EIT to the township.

Several residents suggested the township hold a referendum so residents could vote on whether to implement the new tax. Lawson said townships aren’t required to do that, but a referendum would be needed for an EIT if it were to be imposed by a school district. School districts are limited by the Act 1 Index. That calculation is complicated to the point that Lawson said, “It makes my head spin.”

The question arose about how much money an EIT would generate for the township.

According to the presentation, a 1 percent tax could bring in an estimated $3.74 million, while a 0.5 percent tax would bring in about $2.11 million.

Questions and comments from the public dealt with why the township is considering having an EIT and what would happen if it doesn’t.

Resident Rob Briley wanted to know how the funds would be allocated, considering the township wouldn’t see any new money until the second quarter of 2026, and would not see a full amount until 2027.

Lawson interjected, saying Briley is correct about the timing of funds being available.

Sosangelis then responded, saying, “Rob, this was our first step. We wanted to hear from the residents. We wanted to hear from Keystone Collections, and then we are going to be meeting over the next few months in our advisory committee to start to formulate a plan.”

Briley then suggested that 40 percent of the new revenue would go to fire and EMS coverage.

He later asked what the township might do if the matter went to a referendum and was voted down.

In response, Township Manager Neil Lovekin said, “Township taxes would increase for the fire fund.”

At one point, Supervisor Jake Elks said, “We’re looking to run this township in a financially responsible manner. This is one of those tools. This is not a done deal.”

Patty Borlid suggested using property taxes instead of an EIT, and another resident asked, “Will there be a consideration to increase the millage since it was increased a year ago?”

Lovekin said, “It’s safe to say that an increase will happen.”

Resident Jeff Hammond brought up DOGE and said the township should follow suit in looking at wasteful spending.

“Has anybody looked line-by-line at the budget?” he asked. “The tax increase is one way to address the problem; finding some budget cuts is another.”

Sosangelis said there’s no fat in the budget. “We do look at the budget. We don’t have a Taj Mahal township building, no audiovisual. All of our costs are going up.”

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