Appeal from Order of Commonwealth Court Entered at No. 3293 C.D. 1986, dated December 24, 1987, Sustaining Appellees' Preliminary Objection to Appellant's Petition for Review,
Nix, C.j., and Larsen, Flaherty, McDermott, Zappala and Papadakos, JJ. Papadakos, J., and Stout, Former Justice, did not participate in the decision of this case.
The City of Pittsburgh and its Mayor*fn1 appeal from the Order of the Commonwealth Court sustaining the Commonwealth's preliminary objections in the nature of a demurrer. 112 Pa. Commw. 188, 535 A.2d 680. The Appellants initiated this litigation by filing a Petition for Review seeking a declaration that § 14 of the Local Tax Enabling Act (LTEA), 53 P.S. § 6914, and § 302(a)(7) of the Home Rule Charter and Optional Plans Law (HRC), 53 P.S.
§ 1-302(a)(7), were unconstitutional as violative of the Uniformity Clause of the Pennsylvania Constitution (Art. VIII, § 1) and equal protection clause of the Fourteenth Amendment of the United States Constitution. Named as parties were the Commonwealth, the Governor and the Secretary of Revenue. All defendants filed preliminary objections contending that inter alia, the City was barred from invoking either state or federal constitutional protections, the City lacked standing to assert the constitutional rights of its residents, the Governor and Secretary of Revenue were not proper parties and the classifications distinguishing between resident and non-resident wage earners was valid. Commonwealth Court sustained all the preliminary objections and dismissed the Petition for Review. This direct appeal followed (See 42 Pa.C.S. § 761(a)(1)).
The gravamen of this controversy is the inability of the City to collect its 1.125 percent wage tax from non-City residents who work within the City's boundaries. The Appellants argue that the General Assembly has adopted legislation which effectively prohibits uniform application of the local tax burden. Since the Appellants are attacking the constitutionality of properly adopted tax legislation, it is incumbent upon them to demonstrate that the classification chosen by the legislature is unreasonable. F.J. Busse Co. v. Pittsburgh, 443 Pa. 349, 279 A.2d 14 (1971). To meet this burden the Appellants' evidence must establish that the subject tax legislation " clearly, palpably and plainly violates the constitution." Commonwealth v. Life Assurance Co. of Pa., 419 Pa. 370, 377, 214 A.2d 209, 214 (1965) appeal dismissed 384 U.S. 268, 86 S.Ct. 1476, 16 L.Ed.2d 524 (1966).
The LTEA sets forth the scheme of local taxation in this Commonwealth. Under § 6902 of LTEA, political subdivisions, such as the City of Pittsburgh, may levy, assess and collect taxes for general revenue purposes from persons within their boundaries. Subsection 5 sets forth a prohibition against taxing of non-residents, but is limited to school districts of the second, third, and fourth classes. Section 6908(3) limits the rate of taxation a municipality may assess
against an individual on wages, salaries, commissions, and other earned income to one percent. Finally, § 6914 requires that a non-resident taxpayer be given credit by the municipality in which that taxpayer works for any taxes paid to the municipality in which he lives.
The City of Pittsburgh, however, is a home rule community pursuant to the HRC. Even though a Home Rule Charter permits an optional form of government, under no circumstances may the Home Rule Charter vest any greater powers or authority in the local municipality with regard to the rate for personal taxes charged to non-residents. 53 P.S. 1-302(a)(7). Notwithstanding the adoption of a Home Rule Charter, LTEA controls the rate of tax permissible with regard to non-residents. As indicated, the maximum rate permissible under § 6908(3) of LTEA is one percent.
It is this taxation scheme that the City and Mayor are attacking as unconstitutionally impermissible. In support of their position, the Appellants rely upon Danyluk v. Johnstown, 406 Pa. 427, 178 A.2d 609 (1962) and Leonard v. Thornburgh, 507 Pa. 317, 489 A.2d 1349 (1985).
In Danyluk, we held that the City of Johnstown's attempt to tax non-residents violated the uniformity provision of our constitution. The City had attempted to avoid this obvious result by formulating the assessment as an occupation tax. In actuality, the City was attempting to levy a direct tax on non-residents. In refusing to fall prey to this attempt we stated:
"Capitation or poll taxes are taxes of a fixed amount upon all persons, or upon all the persons of a certain class, within the jurisdiction of the taxing power, without regard to the amount of their property or the occupations or business in which they may be engaged." 51 A.L.R. § 38, p. 66, 1 COOLEY TAXATION § 40, p. 122 (4th ed. 1924). The tax is imposed because of the protection which a governmental unit affords to persons residing therein, and is designed primarily to require ...