EDITORIAL: Time to update mercantile and business privilege tax to allow more flexibility

York Dispatch
  • The Pennsylvania mercantile and business privilege tax was passed in 1961.
  • In 1988, the state enacted a law that froze the rates for the tax.
  • In York County, 11 municipalities impose the tax and collect about $10 million to $12 million annually.

Folks in these parts are normally big proponents of local government.

If it’s left up to them, York County residents will almost always choose to have decisions that impact their lives made closer to home.

T&C Custom is located in West Manchester Township. The owner pays the township's mercantile and business privilege tax.  Jana Benscoter/photo

They don’t like Harrisburg, or even worse, Washington, dictating decisions to them.

That’s why the folks in the state capital would be wise to take some advice from K.C. McCleary, the deputy director of the York-Adams Tax Bureau.

Last week, McCleary weighed in on the mercantile and business privilege tax that Pennsylvania municipalities are permitted to impose.

It’s a tax that has been around for a while now, but in 1988, the state enacted a law that froze the tax rates.

McCleary suggested that the state allow municipalities the leverage to reopen their ordinances to either increase or decrease the tax rate. As it is, if a municipal body votes to remove the tax, it would have to wait for state lawmakers to change the law in order to be able to impose it again, McCleary said.

Those kinds of constraints seem unnecessarily restrictive for local municipalities. They should have more flexibility, under the law, to make the adjustments that best meet their local needs.

Right now, the law offers only a one-size-fits-all approach that can tie the hands of local elected officials.

Mercantile and business privilege tax 'cumbersome' for local businesses

Not a heavily-used tax: The mercantile and business privilege tax is not heavily used in the state. In fact, the Pennsylvania Institute of Certified Public Accountants said the tax only makes up about 5 percent of the total tax collected by the municipalities levying it.

And, the institute reports, “only about 10 percent of local Pennsylvania jurisdictions” have the tax. In York County, only 11 municipalities impose the tax, collecting about $10 million to $12 million annually.

So, it is not a heavily-used means of raising revenue.

Still, the tax can be an effective way of reducing the tax burden on property owners. That’s largely why it was instituted in the first place in 1961.

Decades later, however, the tax law needs some updating.

“It’s a complicated issue and a complicated tax to administer. It can be rather cumbersome to impose it,” McCleary said.

State officials should revisit the law so it’s not quite so “cumbersome” for municipal officials.

Maybe then, local officeholders can mold the tax to best fit local needs. Or those same officials can decide not to impose the tax at all.

Sounds like an idea that folks here in York County would support.