HONESDALE BOROUGH, PA — An hour in to the Honesdale Borough Council meeting of Monday, November 24, area resident Susan Rollison interrupted the council to ask if it would be passing the wage tax that night. 

The council responded that, yes, the tax was on the agenda, and the council would be voting on the proposal that night. 

"Well, that's not good at all for me," said Rollison, representing Honesdale business Prompton Tool. "It's not good for me and my people, I'm sorry."

Rollison stormed out of the meeting, calling on the borough council to learn to balance its budget. "If you give us this wage tax, I'm going to lose my employees and my business," she said. 

The borough council heard that story repeated time and time again throughout the evening, as Honesdale business owners showed up to protest the council's proposal of an Earned Income Tax (EIT). The tax, a 1% tax on the earned income of anyone living or working in the borough, was projected to contribute $400,000 to the borough's 2026 budget. 

After hours of impassioned discussion, the borough council ultimately voted down the proposal, with Mayor Derek Williams casting the decisive vote to break a three-three tie. The decision leaves the borough with a hole in its 2026 budget, one it will need to fill before adoption of the same. 

The working class

Those who spoke against the EIT—in a crowded, three-hour meeting that left some people watching from an overflow room—cast it as an unfair burden on the working people and businesses of Honesdale. 

Tom Shepstone, president of Shepstone Management Company, presented the borough with a group letter supported by 38 businesses, advocating against the EIT. 

"This is a very, very unfair tax," said Shepstone. "It's not an income tax; it is a wage tax. Anybody who makes their living off of dividends or investment returns, they do not pay anything."

Shepstone referenced a recent report from the Pennsylvania Economy League (PEL) on the borough's finances. (Click here for more on their findings.) While PEL did recommend the borough adopt an EIT, it said the borough's finances looked relatively healthy. 

"You had five years of surpluses, if we discount the capital expenses," said Shepstone. "Five years in a row of surpluses. And so I really don't understand why we're here discussing a wage tax."

Another area resident by the name of Jeff summarized the borough's arguments in favor of the EIT. The borough's reasons to impose it involved a lawsuit with an uncertain judgement, stormwater repairs with uncertain grant funding and safety upgrades to borough buildings with an uncertain price tag, he said. 

"You're expecting the taxpayers of the borough to absorb these costs against a future unknown expense when those costs are being levied today to impair our own personal expenses that are known and are today," he said. 

Paul Hopkins, owner of Tri County Distributors, told the council he's facing headwinds with his business. His property taxes have increased every year since 2009, and he will be losing contracts to use his building from the Wayne County Food Pantry and the Wayne County Transportation Department, each of which are seeking other homes. 

He questioned what the borough did for businesses, echoing comments made by Rollison  earlier in the night. "When I look at my property tax and I see 'general fund'—it's not my general fund," he said. "'Debt service'—it's not my debt service. 'Pensions'—it's not my pension, no, I've got to work for mine," he said. 

"You're going to chase people out, [people] like Prompton Tool," he added. "If they can't come down [to my store], then I lose. The borough is losing population. When I took over, there was 5,200 people. Now there's 4,200, I think," he said. 

Honesdale Borough Council Member James Hamill speaks on the proposed enactment of an Earned Income Tax during a Monday, November 24 meeting of the borough council.

Honesdale Borough Mayor Derek Williams sits in a Monday, November 24 meeting of the borough council, hearing discussions on the proposed enactment of an Earned Income Tax.

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A council divided

The borough council split evenly on whether to support the EIT. Council members William McAllister, James Hamill and Tiffany Rogers voted in favor; council members James Cordaro, Kim Fisch and Jason Newbon voted against. Council president James Brennan was absent. 

Rogers thanked those in attendance for expressing their viewpoints respectfully and for coming to the meeting. 

"I think all sides of this issue have extreme merit and we are in a difficult position in the borough in trying to fund all of the programs and things that we need to do," Rogers said. 

Hamill said that, in previous years, the council chose to adopt incremental property tax increases rather than adopt the EIT. 

"I understand that we have a significant majority of folks here in the borough who are asset and income limited and constrained, but we also have folks who are on fixed incomes who have paid for their homes, they don't have a mortgage anymore, and their cost of living doesn't necessarily go up, but their property taxes have for the last three years," he said. 

"It is not an easy decision, from where we sit, to decide who to tax, how to tax, what to tax," he added. 

Cordaro said the borough needed to look at establishing payment-in-lieu-of-tax agreements with some of the property owners in the borough who are exempt from property taxes. 

Williams cast the deciding vote against the EIT. Speaking about the proposal earlier in the meeting, he brought up statistics showing that over 72% of working households in Honesdale qualified as Asset Limited, Income Constrained and Employed.

"If you compare [the EIT] to a potential similar generation of revenue through a property tax, if that were a way to go, that incremental increase in tax burden on property owners is—if you do the math—significantly less than what that tax burden would be on working families who are already struggling to pay the bills," he said.