The paychecks of Harrisburg residents will be a little smaller this year.
A 1 percent increase in the city's earned income tax will go into effect starting with the first paycheck of 2013.
City Treasurer Dan Miller said the increase, which brings the rate to 2 percent, will bring in extra revenue for a city with a $15 million budget deficit, but doesn't come without consequences.
"Taxes really are a big problem here in the city and we need to be competitive with all the outlying areas," Miller said.
The expiration of the federal payroll tax cuts means workers will see a 2 percent increase on their payroll taxes as well. With the new federal and city rates, someone who makes $1,000 every two weeks will now see $30 less on each paycheck.
That change could be difficult for some residents to deal with, Miller said.
"Especially if you're going paycheck to paycheck and suddenly now that's $30 you're not going to have," he said.
Miller said the tax increase could also cause problems for the city itself.
"It's 3 percent more out of everybody's pay. That's less money that goes into our economy and it's less attractive for people to live in the city, and we need to get people to move into the city."
Although other midstate towns have the same 2-percent tax rate, they are required to reduce real estate taxes to make up for the increase from 1 percent to 2 percent; something Harrisburg didn't have to do, Miller said.
"We're getting the increase. We're getting no reduction in real estate taxes. Taxes really are a big problem here in the city and we need to be competitive with all the outlying areas," he said.
Miller believes the city should have adopted a commuter tax to help close the city's budget gap. He says that move was blocked by the Legislature.