PITTSBURGH (KDKA) — Have you heard about a state law that’s going to reduce your take-home pay come January?
It’s news to a lot of people, as KDKA Money Editor Jon Delano found out.
A law passed in 2008 requires all employers in 2012 to withhold the local municipal and school earned income taxes that many workers now pay on their own.
Right now, companies are only required to withhold the local taxes of residents of the municipality in which the company is located.
Sheila Payne lives in Ingram but works in Pittsburgh.
“I haven’t heard anything about that, but that sounds like a good plan to me so I don’t have to worry about it in the future,” says Payne.
That’s part of the idea, says Mary Abbott, who chairs the new tax district that administers this withholding in part of Allegheny County.
“This is actually an improvement for them because it is required that their employer as of January 1st will withhold their earned income tax,” says Abbott.
Delano: “So they won’t need to file these quarterly reports?”
Abbott: “That’s correct. That’s correct.”
Of course, it will reduce the money in your paycheck.
And part of your tax dollars will pay for-profit tax collection companies doing what your tax collector once did.
“In our district, the cost of collection is 1.8 percent. Mt. Lebanon’s current cost of collection is 1.5 percent, so there is a small increase in the cost of collection.”
But business advocates like SMC Business Councils say the biggest burden falls on employers, especially small business.
“It’s going to increase the administrative work on getting this set up,” says Bill Snyder of SMC Business Councils. “It’s going to be huge to set this up for the employers the first time because you’ve got to get all your employees.”
While this law may pose some challenges for employers, here’s another wrinkle.
While your employer is taking your money out of your paycheck, they don’t have to turn it in to the government except on a quarterly basis. That means they get to use your money in the meantime.