Bristol Twp. Discusses Increasing Earned Income Tax At Meeting

Bristol Township officials are considering doubling the municipality’s earned income tax from 0.5% to 1%.

The move, according to a financial consultant at last Thursday night’s meeting, could bring millions of dollars currently flowing to other municipalities back home while potentially allowing the township to reduce property taxes.

Keystone Municipal Solutions presented an updated five-year financial projection examining what the increase would mean for residents and Bristol Township’s finances.

The proposal comes as the township approaches what consultant Dan Connelly described as a long-term “structural imbalance,” despite years of budget surpluses and nearly $22 million in unrestricted cash reserves entering 2026.

“The township has maintained a strong financial position,” Connelly said, pointing to “disciplined fiscal management, conservative budgeting” and annual surpluses.

The problem is where the lines are heading.

Township revenues have remained relatively flat while workforce costs, which account for about 75% of expenses across all funds, have increased about 8% annually since 2021, according to the presentation. 

Health insurance, contractual wage increases, employee step increases and additional staffing are among the factors driving those costs higher. The 2026 budget already required money from cash reserves to balance revenues against expenditures.

Without corrective action, Keystone’s baseline projection estimates a roughly $3.1 million deficit in 2027.

Bristol Township currently collects about $9 million annually through its 0.5% EIT, with collections projected at about $9.4 million in 2027 at the existing rate. Raising the tax to 1% would eventually come close to doubling that revenue, according to the analysis.

Because collections would lag during the first year, Keystone conservatively assumed Bristol Township would receive only about 60% of the additional revenue in year one. Even under that assumption, the projection showed a roughly $2.5 million surplus instead of a deficit.

That amount is equivalent to roughly six mills of real estate taxes, Connelly said. Bristol Township currently levies just under 25 mills in total. Connelly cautioned officials against cutting property taxes too deeply because projected surpluses decline over time as expenditures continue growing.

But township officials made clear Thursday that a real estate tax reduction is being considered as part of the equation.

Keystone estimates about 70% of the township’s roughly 26,500 working residents work either in Philadelphia or another Pennsylvania municipality imposing a nonresident earned income tax.

Under Pennsylvania’s EIT reciprocity system, taxes paid by a Bristol Township resident working in another participating municipality can follow the worker back to the municipality where the person lives, up to the home municipality’s rate.

For instance, currently, if a Bristol Township resident works in a municipality charging 1%, the township receives its 0.5% while the other municipality retains the remaining 0.5%.

Raising Bristol Township’s rate to 1% could redirect an estimated $4 million to $4.3 million of that money back to Bristol Township, Connelly said.

“The residents are already paying it,” he said. “Instead of going to somebody else’s general fund, it would come here.”

Philadelphia is the major exception. Its nonresident wage tax remains with the city.

About 4,200 Bristol Township residents work in Philadelphia, representing roughly 16% of the township’s working residents, according to the presentation. About 2,900 both live and work in Bristol Township, who would also see an EIT rise to 1%. 

Residents working in New Jersey and certain other states could also see an increase depending on their circumstances.

“This is certainly not a free lunch,” Connelly said. “It certainly would be a new tax for a lot of people, about 30% of Bristol working residents.”

Retirement income, pensions, Social Security and disability benefits are not subject to the EIT. 

The township could also shift some of the tax burden from real estate to earned income particularly beneficial to retirees. About 16% of Bristol Township’s roughly 54,000 residents are 65 or older, according to Keystone.

Low-income exemptions are also possible.

Council members recalled the township having only about $700,000 in surplus when they took office and being warned that bankruptcy was possible.

“The first assignment that Bill McCauley gave me was to research how we filed bankruptcy,” solicitor Randy Flager recalled during Thursday’s discussion.

Inflation and rising personnel costs are now catching up with a revenue structure that hasn’t grown at the same pace. 

“Everything’s gone up,” Council President Craig Bowen said. “Fuel and our revenue coming in is the same. So we have to bring extra revenue in.”

Township officials said residents will get a clearer picture when Bristol Township presents its preliminary budget. Some could see a shift in where their EIT goes combined with whatever property tax reduction council ultimately proposes.

“People just want to know, how’s it going to affect me?” township Manager Randee Mazur said. “And we will be showing them that.”  

Residents questioned the proposal Thursday, including whether the Bristol Township School District could eventually claim part of the EIT. Township officials said the school district currently does not levy an earned income tax and that 1% is generally the statutory municipal limit. 

A school district can impose an EIT via require voter approval through a referendum.  

The township is also considering addressing Bristol Township’s liability for retiree health benefits. The township currently spends about $2 million annually on post-retirement medical benefits, compared with about $1.8 million for health coverage for current police officers, according to the meeting discussion.

No vote was taken Thursday night.