Proposed Earned Income Tax to Close the Gap in Middletown

Structural imbalance in the budget is likely to lead to an earned income tax for the workers of Middletown.

Since 2006, there has been structural imbalance in the General Fund, according to township manager, Stephanie Teoli-Kuhls.

Reasons for the loss of funds in 2013 include increase in police pension and healthcare costs and loss of the anticipated $1,300,000 budgeted transfer from the Investment Fund to the General Fund due to poor performance of the Investment Fund, according to Teoli-Kuhls.

This leaves the General Fund out of balance by about $4,000,000, according to report.

On Monday, after reviewing several options, supervisors voted 4-1 for the 2014 preliminary budget that includes the proposed tax of 1 percent.

Several options were looked at to help close that gap, according to Teoli-Kuhls.

The only option that would not affect services and the investment fund is to initiate the earned income tax for all resident and non-resident workers of Middletown.

Currently 95 percent of other townships in the state are already collecting this tax, according to Pat Mallon.

“This tax is the fairest way to go,” said Mallon. “It does not affect the retired or unemployed.”

“This has been a problem,” said Mallon referring to deficit.

Supervisor, Tom Gallagher disagreed stating that 56 percent of the workers of Middletown would be hit with the tax they never had.

“Unload assets we shouldn’t have,” said Gallagher. “The Country Club, the Orchard.”

Gallagher suggested the tax be out on a referendum for him to vote for it.

But the problem needs to be fixed now, according to other officials. And unloading assets and putting the vote on a referendum take time.

Currently 44 percent of Middeltown workers pay the earned income tax to the municipalities they are employed in.

If Middletown implements this tax it would restore $2,606,546 in taxes that are paid to other communities.

The tax would go to the municipality the worker resides in.

A $1,000,000 emergency transfer from the Investment Fund to the General Fund and reduction of Real Estate Millage by 2-mils was also proposed at the meeting.

The reduction of 2-mils would save each Middletown homeowner about $58.

There will be a town hall meeting on Dec. 4 at the Middletown Senior Center from 3 p.m. to 6 p.m. to answer questions about the budget.

The next board of supervisors meeting is set for Dec. 16 at which time the final budget will be voted on.