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Phila. Official Announces More Vigorous Collection of School Tax

By Mike Dunn

PHILADELPHIA (CBS) -- The tax man cometh, to the relief of the Philadelphia school district.

Nutter administration officials are promising to do a better job collecting a little-known tax that applies to income from investments and which goes entirely to the school system.

The so-called "School Tax" is a tax that many Philadelphians have never heard of.  It applies to income from dividends, short-term capital gains, and other unearned income outside of retirement accounts.

Revenue commissioner Clarena Tolson told City Council's Rules Committee today that the tax often goes unpaid, due to ignorance or deception.

"I do think there's a large number of people who don't know, so education is important.  And they may be smaller scale.  But there may be also those who have corporations or partnerships who have intentionally not addressed it, because we may not have historically done the follow-up," she said.

So, Tolson is vowing to improve that follow-up through better cooperation with the state, which also taxes those types of unearned income.

Once the city has identified those who aren't paying, Tolson says, the city will apply a carrot-and-stick approach.

"We're developing educational materials of what the tax is and what it requires, because it may be a case that many people do not know that they owe the tax.  Should they continue to fail to comply, then we move to a process to address our concern.   It could be liens, it could be fines, it could be things that are even more severe."

The School Tax generated about $25 million last year, but Tolson predicts that could be higher with better follow-up and enforcement.

She also says the revenue would be greatly boosted if the city received authorization from Harrisburg  to apply the tax on all capital gains, as the state itself does, not just short-term gains.

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