1% wage tax (Pittsburgh, Beaver, Atlantic: assessors, mortgage, houses)

[BrianTH]

Originally Posted by entropyconcentrated

Please help me understand this wage tax.

It is indeed 3% of your earned income if you live and work in the City. Incidentally, 2% goes to the school district, and that is part of why property taxes in the City aren't higher.

[Lobick]

Originally Posted by BrianTH

It is indeed 3% of your earned income if you live and work in the City. Incidentally, 2% goes to the school district, and that is part of why property taxes in the City aren't higher.

Allegheny County Treasurer

The school district millage rates in the City are the lowest in the County. It's an attempt to fund schools in a more equitable manner.

[Bong477]

If you look at your total state and local income tax burden here it is pretty reasonable at 4-6% and similar to a good deal of the rest of the country. The tax is flat with extremely few deductions, which personally I think is about as fair and simple as it gets, but I don't want to get into a debate about the merits of different ways to tax with people that will argue that flat taxes "benefit the rich."

In Maryland I paid local income tax too, but it was bundled as part of the state income tax and applied progressive (some may say regressive) rates and complicated federal tax style deductions so it was less transparent. Honestly, when you factor in all the different ways you are taxed and let the smoke clear, the differences in total tax burden from state to state usually aren't as much as you think.

[FreightTrainRunning]

Originally Posted by Lobick

Allegheny County Treasurer

The school district millage rates in the City are the lowest in the County. It's an attempt to fund schools in a more equitable manner.

I always figured that it was a way to transfer the tax load more toward young people and away from seniors. Seniors are more likely to have more property and less income and young folk are the opposite.

[entropyconcentrated]

Originally Posted by Lobick

Allegheny County Treasurer

The school district millage rates in the City are the lowest in the County. It's an attempt to fund schools in a more equitable manner.

OK. I think I understand better now.

I once looked at another SW PA county. It has several "property" taxes: county, local municipality, and school. It surprised me how high the total was (eg 50000 market value == 5000 total tax) There was also a nominal occupational tax.

I did not realize that the City used 2% strictly for schools. Just be clear, there is no other property tax for city residents that is for schools, correct?


I have no problem paying flat/progressive/regression tax, especially when it eases the burden of those with modest means.

My confusion comes from cost of living calculators. Pittsburgh is much lower than many other cities. This seems tightly linked to good / reasonably low housing costs. But the tax burden in SW PA seems quite high.

[Lobick]

Originally Posted by entropyconcentrated

I did not realize that the City used 2% strictly for schools. Just be clear, there is no other property tax for city residents that is for schools, correct?

No, there is. 13.92 is the current millage rate of the Pittsburgh School District or 1.392% of your assessed value.

The City's rate (municipality) is currently 10.8 or 1.08% of your assessed value.

$1,236 in property taxes per $50,000 in value for the city and school district combined. The 3% wage tax is on top of that, $1,500 per $50,000 of income.

[greg42]

Originally Posted by entropyconcentrated

OK. I think I understand better now.

I once looked at another SW PA county. It has several "property" taxes: county, local municipality, and school. It surprised me how high the total was (eg 50000 market value == 5000 total tax) There was also a nominal occupational tax.

I did not realize that the City used 2% strictly for schools. Just be clear, there is no other property tax for city residents that is for schools, correct?

I have no problem paying flat/progressive/regression tax, especially when it eases the burden of those with modest means.

My confusion comes from cost of living calculators. Pittsburgh is much lower than many other cities. This seems tightly linked to good / reasonably low housing costs. But the tax burden in SW PA seems quite high.

Property taxes are only on "real" property (real estate). There are no annual taxes on cars or other "personal" property. (California had/has a significant annual car tax as I recall. Here the plate renewal is $36. There is an annual inspection that runs about 50 bucks or so combined, payable to the regular private repair garages who are authorized to do inspections.)

The property taxes come from 3 entities as you noted: county, municipality and school district, with the last being by far the largest amount. You have to pay those if you OWN the property (house, condo, etc.) The amount you cited though, something on the order of 10%, is way too high. It does in fact typically run around 2-3% of the real value of the real estate. In other words, on $100k value, it could be $3000 in tax combined.

The local tax being discussed in this thread is a wage tax aka earned income tax. "Earned" is as opposed to unearned; the local tax is a very narrow one applied to earned income; unearned income like stock investment, interest, etc. is not subject to this tax. (The state income tax is broader and does tax those things.)

Local wage tax is due based on where you live, based on earned income. State income tax is due when you live anywhere in the state. Property taxes are due based on assessed value of any real estate you actually own, based on where the property is.

The cost of living calculators remain correct because overall, on average, the cost of comparable property is much lower here, so even combined with the high property tax rates the housing cost comes out ahead. On average. One can find examples that don't fit, I'm sure. Income tax burden is also somewhat lower in many cases.

[BrianTH]

Originally Posted by entropyconcentrated

My confusion comes from cost of living calculators. Pittsburgh is much lower than many other cities. This seems tightly linked to good / reasonably low housing costs. But the tax burden in SW PA seems quite high.

If you add up all the state and local taxes and look at it as a percentage of income, I think you'll find that the tax burden is pretty typical/average for a larger metro area. But that does stand in contrast to housing costs as a percentage of income, which are very low for a larger metro.

In fact, as you are suggesting it is really mostly housing costs that drive the overall low cost of living here (other stuff tends to be close to average for a larger metro, give or take). That said, cheaper housing can feed into lower other costs as well--for example, you may be able to afford a shorter commute here, and/or a public transit commute, which could save you transportation costs.

[LIRefugee]

Originally Posted by greg42

If you live in the city, that's exactly how much it is. This tax is levied by the local municipality (city, borough, etc.) and the school district, although it is all collected together as one amount. The City of Pittsburgh amount is 3%. Many of the surrounding municipalities are 1% and a few have oddball amounts in between. If you work in the city limits and live outside the city, your rate is determined by where you LIVE rather than where you work. If you work in the city limits and live outside of Pennsylvania (across the border in WV or Ohio, say) 1% is due to the city.

These amounts will be withheld from your pay by your employer, and you reconcile at the end of the year, like federal income tax. Unlike federal income tax, there are not a bunch of exemptions and such so for a typical middle income person you don't get any refunds at the end of the year. You also don't typically owe more. This is a flat tax. The state level income tax is similarly flat at 3.07%. So total state and local income tax about is 4-6%. Is this more than in California? That seems unlikely to me, although admittedly I don't actually know off the top of my head....

My understanding is that if you LIVE in Pittsburgh, all income is subject to the 1% wage tax and 2% school district tax regardless of where you work, but if you are taxed by a different state, the amount of this income tax exceeding 3.07% can be deducted from your PGH tax burden. Also, if you work in a different PA municipality, I understand the wage tax of that or PGH can be deducted from the other, though I'm not sure which.

[greg42]

Originally Posted by LIRefugee

My understanding is that if you LIVE in Pittsburgh, all income is subject to the 1% wage tax and 2% school district tax regardless of where you work,

That's right

Originally Posted by LIRefugee

but if you are taxed by a different state, the amount of this income tax exceeding 3.07% can be deducted from your PGH tax burden. Also, if you work in a different PA municipality, I understand the wage tax of that or PGH can be deducted from the other, though I'm not sure which.

I believe the technical way it works is like this: if you don't LIVE in the City of Pittsburgh, you NEVER owe the 2% portion of the wage tax that goes to the school district. The 1% you would potentially otherwise owe for the remaining part to the city is offset by the 1% (or more) that you are paying your OWN municipality/school district where you live. For example, for the last 20 years I have worked in the city, but for the last 13 or so I have lived outside it. I paid my 1% tax to Emsworth/Avonworth schools and now to Economy/Ambridge schools. So I owed nothing to the city.

When you live out of state, you don't have this offset so you owe (and employers will deduct from your pay) 1% to the city. Other municipalities may also collect like this, not sure. It's possible that if you work in Cranberry and live in Ohio you'll still need to pay them 1%, or maybe 0.5% if it's a 50/50 split.

The practical upshot is if you live in PA but not in the city, you don't owe the city anything for wage tax. (There is the LST, that is separate, $52/year for everyone.)

Now that the withholding is universal (all PA employers must withhold local tax for ALL PA local tax jurisdictions), you shouldn't have any more scenarios where your employer is withholding the city amount that you'll then have to try to get back from the city. You do have to make sure you provide them with the right municipality and school district info though.