On Tuesday, Oct. 14, the Swarthmore Borough Council passed a memorandum of understanding (MOU) that Swarthmore College will give $638,000 to the borough. The borough of Swarthmore was facing a major budget crisis and, until the contribution, was considering an Earned Income Tax (EIT) to help address it. The college’s funds will help to close the funding gap this year and render the tax unnecessary for the time being.
An EIT is a tax on income earned in the municipality or by residents of the municipality. If someone lives or works in a place with an EIT, they pay the tax on their income to that municipality. However, if they live and work in two separate municipalities that both have EITs, they pay the tax only to their residential municipality, not their municipality of employment. 26 of 49 municipalities in Delaware County have an EIT.
While Swarthmore College, the borough’s largest property owner and employer, is a tax-exempt institution, the wages and salaries of college employees would have been subject to the EIT. VP for Administration and Finance Rob Goldberg shared with The Phoenix that his office estimated that 75% of the college’s employees would have been subject to an EIT, suggesting that the other 25% are already paying it in Philadelphia or another municipality with an EIT.
“Given the financial burden this would have placed on so many of our community members, we engaged the borough leadership to explore alternative measures that would help address the budget pressures they face without having such a negative impact on our campus community,” he said.
In Pennsylvania, EITs are effectively capped at 1% of wages and salaries, and don’t apply to passive income such as stock returns. Swarthmore Professor of Economics and longtime borough resident Mark Kuperberg guessed that Swarthmore’s EIT would have been 0.5% if implemented.
In total, Keystone Collections Group, a firm that administers EITs in nearby towns, estimated a 0.5% EIT would collect around $1.6 million for the borough once the system was fully up and running in its second year.
The basis for the EIT proposal was the borough’s largest funding challenge: rising public safety costs resulting from the recent closure of Crozer Chester Medical Center. The hospital had subsidized advanced ambulance services — also known as advanced life support (ALS) — in Swarthmore and other nearby boroughs, and its closure forced municipalities to provide the service to residents on their own.
In an email to The Phoenix, Swarthmore Mayor Marty Spiegel (D) wrote that the borough collaborated with nearby communities to create their own ALS services. “It was an expensive and complex process, but due to the hard work of many municipal leaders and health care professionals, we were able to accomplish [a contract with a private provider] and continue to provide this essential service to our residents.”
This additional cost came while the borough was already facing a drop in volunteer firefighters and general inflation. Early budget estimates showed a 41% increase in annual public safety costs, on top of a 22% increase in general government expenses. A Sept. 4 borough public information and input session on the EIT showed that these hikes and others caused a $1.4 million increase in borough expenses for FY 2026, met only with a $300,000 increase in revenues.
To help remedy its community’s fiscal challenges while also protecting staff member interests, the college sought mechanisms other than the EIT. Goldberg and Associate VP for Campus Services Anthony Coschignano worked with the Borough Manager Bill Webb and borough council members. President Val Smith and some faculty members were also consulted on the matter.
Documents from past budget cycles show that the college has historically made yearly contributions, a common practice by tax-exempt wealthy institutions known as Payments in Lieu of Taxes (PILOT), which have been slightly below $300,000 in recent years. The college’s $638,000 infusion is an addition to its already-committed 2026 PILOT of $295,000. Goldberg told The Phoenix that the college’s recent contribution comes from built-in flexibility in its operating costs and won’t impact other areas of the budget.
Documents from after the MOU was passed show that the $638,000 from the college will count as revenue from the borough’s Fire and Ambulance Service, and will bump the borough’s total 2026 revenue up to $7.8 million to cover an estimated $7.9 million in expenses. Both Goldberg and Spiegel say the relationship between the local government and the school has been strong in recent years. They both referenced the college’s annual contribution to the borough, which was increased this year, as a sign of mutual support.
To be sure, economic theory predicts that a 0.5% tax on college employee income would push up college salaries and wages equivalently over time, costing the college in the long term. However, Kuperberg feels it’s unlikely that the college would actually have to raise its compensation to a great extent, if at all, calling himself a “bad economist” for this suspicion. In his view, the college’s contribution demands a different explanation. “I think it’s a little more of a moral thing,” he said, guessing that the college administration felt it should try to use its resources to protect the college’s low-wage earners, for whom an EIT would have been most impactful.
Conventional analyses, including that of the presentation, classify income taxes like EITs as more progressive than property taxes, given that low-income residents put a larger share of their income towards housing costs (either property or rent that property taxes would raise) than wealthier people do. Therefore, taxes on property represent a greater obligation relative to income to poor people than to wealthy people.
Despite this narrative, Kuperberg said an EIT in Swarthmore might have played out differently. “The devil is way more in the details of this particular tax than in pretty much any other tax.”
Kuperberg hypothesized that the Swarthmore residents who work in Philadelphia, and therefore would pay the city’s tax rather than the borough’s, tend to be doctors, lawyers, and other well-paid professionals. While he’s less sure this is true for the people who work in Swarthmore but live in Philadelphia, and therefore also wouldn’t pay Swarthmore’s tax, he said, across the board, “I think the odds are that the people paying the Earned Income Tax would have lower wages than the people who were exempted from the income tax.”
In Kuperberg’s view, property taxes get a bad rap that is only partially deserved. While he says it’s true that, in general, wealthy people spend a lesser share of their income on property, he suggests this is mostly true only in the upper two-thirds of the wealth distribution. Therefore, property taxes are less regressive for the bottom third of the distribution, where property taxes are either on extremely cheap properties or split up among large numbers of building residents.
“If we have a head-to-head test for earned income tax versus property tax on who’s more regressive, it’s really not clear at all who wins that race,” Kuperberg remarked.
Should the borough continue to have financial challenges, Kuperberg said the community can afford small property tax hikes. “The thing is, the town is not a poor town. Property values here are high, so people can afford an extra mil [a small unit of tax rate] on their property taxes. And that’s how it should be solved.”
In the absence of property tax hikes, the continuing financial interdependence between the college and the borough exemplifies the relationship many schools like Swarthmore have with the localities that house them.
To Kuperberg, the college’s presence is a tradeoff for the borough. While there are huge benefits that come for residents from living next to a large, arboretum campus with all of its resources, concerns for the borough might arise if the tax-exempt college owns too much of the borough’s properties. “I think some amount of contributing back from the college to the borough’s [tax base] is warranted because of that.”
Goldberg emphasized that the college and the borough’s agreement does not preclude an EIT from being implemented in future years, and Spiegel remained open to the idea as well. While Spiegel was positive on the college’s contribution this year, highlighting that it was in no way required and that the college has been very responsive to the borough’s needs. He also wrote, “Ideally, an EIT would lead to a decrease in the need for property taxes to continue rising to meet the borough’s financial obligations.”
Kuperberg predicts that the borough’s financial position will soon be more secure because of a currently developing plan to collaborate with nearby communities on a multi-municipal authority that issues a small property tax providing ALS services. “The financial hit is really only a one- or two-year hit until that organization is up and running and can collect property taxes.”
Goldberg agrees that it remains in the best interest of the college to ensure that the borough’s financial structure is sustainable. “To this end, we are already in discussions with the borough about future years, especially as it works with other municipalities on a long-term financial solution to manage emergency services in the wake of the closure of Crozer-Chester.”
Still, such a transfer of the college’s private funds to the local government’s public sector is relevant for those on campus who have been pushing the college to use its resources to engage beyond campus lines.
The Phoenix asked Goldberg and Kuperberg about whether the college could and/or should commit, either out of self-interest or social responsibility, to similar contributions to the nearby city of Chester, PA, as it faces much longer-term and more severe financial struggles.
Goldberg highlighted Swarthmore’s curation of curricular and extracurricular opportunities for students to get involved in Chester, estimating that this programming amounts to $430,000 “in equivalent service and direct financial support to Chester-specific initiatives and organizations.”
Still, Goldberg feels that these are two separate issues. “Our financial investment in the borough stems largely from our reliance on borough services, such as emergency response, and, in the case of the Earned Income Tax, our effort to prevent a large percentage of campus employees from being subject to a new tax.”
Kuperberg also mentioned the college’s curricular engagement with Chester, but agreed that those programs were different in nature than a direct contribution like PILOT funds.
While he certainly feels the college has some obligation to a larger community, Kuperberg thinks saying the college has a responsibility to Chester just because of its geographic proximity is a “harder case to make,” both philosophically and to college donors. Thus, he feels a contribution like the one the college made to the borough, without any kind of foundational PILOT tradition or agreement with Chester, is very unlikely.
Swarthmore’s financial contribution to the borough comes after a summer in which its administrators communicated with state legislators about the Southeastern Pennsylvania Transportation Authority’s funding challenges and lobbied federal lawmakers against an endowment tax for small colleges.
Goldberg addressed this context, hypothesizing that the college might have contributed the $638,000 to the borough even with a federal endowment tax. But, he agreed that “the issues we resolved with the borough and those that we are dealing with at the federal level are separate but related. The fact that, beginning in 2027, we will not be subject to the endowment tax gives us some flexibility to help resolve issues like the EIT.”
