ALLENTOWN, Pa. — After years of deficit spending, Lehigh County lawmakers are exploring outside-the-box solutions to raise new revenue, including a so-called "wealth tax" that would target stocks, second homes and S corporations.
But a plan floated by county Controller Mark Pinsley hinges on a tax power that local officials and other counties abandoned decades ago after the state Supreme Court deemed elements of it unconstitutional.
"We need to crack this cookie. I think we should explore it, we should look into doing it, but we should be doing our research and find out if we're in a place to do it."Lehigh County Executive Josh Siegel
Enacting such a plan also would entail startup costs to set up a system to tax intangible assets, and invite litigation that would tie up resources.
In an interview with Lehigh Valley Public Media last week, county Executive Josh Siegel said he does not intend to call for a wealth tax when he releases his 2027 budget proposal in August.
However, Siegel offered broad support for the concept, saying Lehigh County and America as a whole needs to find a way to shift more of society's cost burden onto the ultra-wealthy.
"We need to crack this cookie," Siegel said. "I think we should explore it, we should look into doing it, but we should be doing our research and find out if we're in a place to do it."
The need for action
The need for some type of action is apparent.
In four of the past five years, commissioners balanced the county budget by raiding its reserves.
The 2026 budget anticipates outspending revenues by $3.7 million, Siegel said. Projections show next year's budget would necessitate taking $5.5 million from reserves.
If the county doesn't do something, it will no longer have the recommended $25 million in its stabilization fund to weather cost overruns and cash flow challenges.
"We're sure as [expletive] not cutting our way out of this crisis. If your solution is to cut, you tell me how many prison guards you want to fire or how many children and youth workers you want to let go or how many parks you want to defund."Lehigh County Executive Josh Siegel
The health of that fund let Lehigh County avoid cutting services or furloughing employees when state lawmakers failed to pass a budget on time and the federal government shut down last year.
Siegel, who took office this year on a platform of expanding county government, said cuts are not on the table.
The county's property tax rate is lower now than it was 13 years ago, even though the population has grown by about 25,000 people and inflation has climbed 43%.
County services can't be compromised, either, Siegel said; the county employs nurses to care for the elderly, attorneys to prosecute criminals and engineers to maintain vital bridges, among other duties.
"We're sure as [expletive] not cutting our way out of this crisis," Siegel said.
"If your solution is to cut, you tell me how many prison guards you want to fire or how many children and youth workers you want to let go or how many parks you want to defund."
Targets of the tax
Counties in Pennsylvania have limited options when it comes to steady sources of income.
Unlike the state, it can't charge a sales tax. Unlike cities and townships, it can't enact commuter taxes or earned income taxes.
For nearly 30 years, counties have been almost entirely reliant on property taxes.
Currently, Lehigh County raises about $114 million through its property tax. The rest of the $558.8 million budget is mostly paid with state and federal pass-through funding.
But in early May, Pinsley released a report exploring a 0.4% flat tax on intangible personal property.
Counties have had the option of enforcing the tax for decades, and Lehigh County used it as recently as the 1990s, Pinsley said.
Re-adopting the tax would let the county generate about $25.5 million by taxing sources what he described as traditional sources of passive income, he said. Those include:
- Stocks
- Bonds
- Mutual funds
- Exchange traded funds
- Brokerage investment accounts
- Partnership ownership interests
The tax wouldn't touch residents' primary residence, cars, personal property, checking accounts, retirement accounts such as IRAs and 401(k)s or family farms operated by their owners, according to the report.
The proposal, he said, was based on one put forward out of Philadelphia.
'Maybe there's a better way'
If cuts aren't an option, Pinsley said, the county will need to raise at least $5.5 million to cover the deficit spending in the near future.
That number could get significantly larger depending on how the federal government reduces spending through the One Big Beautiful Bill Act.
Cuts to Medicaid and are scheduled to go into effect next year, but it's not immediately clear how those will be applied or whether county operations would be affected.
"The goal is to raise money. It's not to hurt anybody. It is to help the majority."Lehigh County Controller Mark Pinsley
"What I'm saying is, maybe there's a better way of doing that so that the people that have the most pay the most," Pinsley said.
In Pinsley's report, the tax would apply to all county residents across the board; the county's tax collector would get the information on the intangible assets from the IRS.
It estimated that 91% of the generated revenue — about $23.3 million — would come from households with more than $200,000 of taxable assets.
In an interview Tuesday, however, Pinsley said he supports adding a threshold so an individual's first $200,000 of assets wouldn't be taxed.
That would provide some security for small business owners and people with moderate assets while still letting the county raise revenue from its wealthiest residents, he said.
County commissioners also would be free to lower the property tax so the "wealth tax" is less of a tax hike and more of a tax shift, he said.
"The goal is to raise money," Pinsley said. "It's not to hurt anybody. It is to help the majority."
Vocal opposition
The proposal has drawn stiff resistance from some quarters.
County Commissioner Ron Beitler has attacked it as an unconstitutional assault on responsible residents and small businesses, particularly ones that operate as S corporations.
Unlike other business structures, S corporations pass along their income, losses, credits and deductions onto their shareholders.
People who made savvy investments by putting money into stocks would be punished, while people who kept the same amount of money in a savings account would not, Beitler said.
Government shouldn't be incentivizing constituents to make poor financial decisions, he said.
"It's akin to a perfect game in baseball. I don't see it happening."Lehigh County Commissioner Ron Beitler
If that wasn't enough, the tax was abandoned around the same time legal challenges mounted against it in the late 1990s and early 2000s.
The state Supreme Court determined that provisions in the law that levied different taxes against stocks for foreign companies that didn't do business in Pennsylvania violated the U.S. Constitution.
When informed that Pinsley had proposed a threshold on the tax to shelter most small businesses and lower earners, Beitler questioned whether the change would comply with the Pennsylvania Constitution's Uniformity Clause.
The provision requires the state to apply taxes equally to all subjects the tax applies to; as a result, Pennsylvania doesn't have a tiered income tax.
"If this surviving a legal challenge on just the broad aspect of it is a Hail Mary, then trying to thread needle of the threshold plan?" Beitler said.
"I don't know, it's akin to a perfect game in baseball. I don't see it happening."
Beitler expressed sympathy toward the goal of easing the tax burden on working families and seniors. Instead of a wealth tax, he said the county should explore using a provision of the Homestead Act to shift property taxes so that people with sprawling tracts and expensive homes pick up more of the bill.
Under his plan, the county would calculate the median property value and would not apply taxes for the first half of that value.
For example, if the median property is assessed at $200,000, the owner of a property with an assessed value of $100,000 would pay no property taxes, while the owner of a $1 million property would pay taxes on $900,000 of it.
"I want to have this conversation, and I am going to be putting an alternative on the table," Beitler said.
Incoming discussion
The Lehigh County Board of Commissioners will explore the topic in more detail at its 6 p.m. June 17 Finance Committee hearing.
Committee Chair Sarah Fevig has requested that county solicitors explore whether the intangible asset tax as a whole still is constitutional.
While acknowledging she's not licensed to practice law, Fevig said she believes that passing a constitutional "wealth tax" would be tricky but not impossible.
"This to me is not at all a question of a tax increase or not. It's a conversation about how we want to fund our government."Lehigh County Commissioners Finance Committee Chair Sarah Fervig
She said she intends to invite three experts to offer different opinions on the merit of the tax.
The board of commissioners already has received significant feedback on Pinsley's proposal from constituents, she said.
Commissioners are looking for an alternate site for the hearing to accommodate the anticipated crowd.
In an interview Friday, she emphasized that the conversation is entirely exploratory at this point. No legislation has been proposed, and the board is not married to the version Pinsley put on paper.
She, for one, said she would want to determine whether a threshold could legally be applied.
"This to me is not at all a question of a tax increase or not," Fevig said. "It's a conversation about how we want to fund our government."
