New tax proposal could have Scranton businesses paying more

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SCRANTON, LACKAWANNA COUNTY (WBRE/WYOU) — A proposed taxation change in the city of Scranton could have businesses paying more.

The shift in how it’s collected is part of Scranton’s exit as a distressed city.

There are more than 400 Gerrity supermarket employees in the city of Scranton. Across three store locations and one corporate office.

“Supermarkets are very labor intensive. I mean there are people working in our stores at almost all hours of the day. So anything that is going to be taxed payroll is going to be a significant increase in costs to us,” explained Joe Fasula, Co-Owner of Gerrity’s Supermarkets.

Fasula says with the Scranton School District’s proposed payroll tax, his company will pay $93,000 more than the current business privilege mercantile tax. An employer’s payroll tax would replace the mercantile tax at 1.085 percent.

“We anticipate that our costs is going to go up by 300 percent. It’s going to quadruple,” said Fasula.

“It seems I am going to be paying three times what I have been paying in the past,” said John McDonald, owner of Electric City Pizza and Subway.

A dozen people make up McDonald’s payroll roster. Much smaller than Gerrity’s, but a big impact for a small business.

“I thought, okay if we add more businesses to the pool I should benefit. But that’s not what it’s looking like,” explained McDonald.

Businesses that were exempt under the mercantile tax are no longer. Scranton School Board approved the proposed move on Monday and is in its preliminary stage.

“The conversion must be revenue neutral. The legislation states that you can collect no more dollars than you collect with the business privilege mercantile tax. So that is why the rate has been set based on that calculation,” stated Katie Gilmartin, Scranton School Board President.

Gilmartin says the district brings in $7.3 million a year in mercantile tax. Once approved, the rate can be adjusted up or down only once to maintain that revenue neutral.

“One of the strongest selling points is its collectability. it can be reconciled against earned income tax data so we can know that we are hitting our targets,” explained Gilmartin.

The Scranton School Board is likely to make a decision on the tax change by the end of the year.

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