Municipalities and school districts soon will have to rely less on the honesty of residents to send in the wage tax they owe.

Starting no later than Jan. 1, 2012, employers will deduct earned income tax for all of their workers and forward the proceeds to new county and district collectors. Those regional collectors will then distribute the proceeds to communities and school districts.

The new system is mandated under a state law called Act 32, which was passed by the Legislature and signed by Gov. Ed Rendell in July 2008. The state Department of Community and Economic Development has been offering workshops to help local officials put the new program in place.

If the new system works as advocates promise, it should cut administrative costs and raise more than $200 million in now uncollected earned income taxes.

Act 32 will reduce the number of wage tax collectors from the current 560 to 69. Revenues will be collected on a roughly countywide basis in most places. The exception will be in Allegheny County, which will be divided into four collection districts.

"On the surface, this plan has a lot of upside potential," Monroeville Manager Marshall Bond said. "But if you are creating a new entity, the start-up costs can be high. Where will the funding come from to start the new agency?"

"This new system has the potential to be complicated," Reserve Manager Dick Hadley said. "We are creating a new level of bureaucracy."

State officials say those fears are unwarranted.

The new regional system will offer more oversight, efficiency, accountability and access to technology, including electronic transfer of funds, according to Mitch Hoffman, a policy manager with the Governor's Center for Local Government Services. The center is part of the Department of Community and Economic Development.

The center has offered 22 workshops across the state for local officials to explain how the new tax collection system will work, Mr. Hoffman said.

Under the current system, employers withhold wage tax only from workers who live in the community where the business is located. The rest of the workers, as well as self-employed people, must pay the wage tax to their home communities and school districts on their own.

A Pennsylvania Economy League study estimated that as much as $237 million in earned income tax is not being collected each year, primarily because of lack of self-reporting by taxpayers.

The new system will introduce a standardized form on which all workers must list residence information. Those forms will provide the basis for the automatic payroll deductions of wage tax, based on the communities where the employees live, Mr. Hoffman said.

The new regional collectors will be responsible for forwarding the money to individual school districts and municipalities.

The combination of central collection and a standardized withholding form should make life easier for many businesses, Mr. Hoffman said.

"While an employer will have to know where workers live and what the communities' tax rates are, the company then will have to write just one check," Mr. Hoffman said.

That will be a special benefit for companies such as Walmart, which has stores across Pennsylvania, he said.

While Act 32 requires that only wage taxes be collected on a regional basis, Mr. Hoffman said it would make sense ultimately to gather other levies, such as the annual local services tax and mercantile taxes, using the same system.

Act 32 does not require that the new regional collectors take on those duties.

"I don't see that happening right away," Mr. Hadley said.

In any case, property taxes -- a major source of revenue for school districts and most municipalities -- are excluded from the act and will continue to be collected in local offices.

Ross Manager Wayne Jones said he was not sure his township would see increased revenues from the regional collection system.

The township contracts with North Hills School District to collect its wage, business privilege and local services taxes. "I don't believe we are missing very much [in uncollected taxes]," he said.

He and several other municipal officials said they were concerned about longer lag times before wage tax revenues arrived in local accounts.

Some communities and school districts that collect their own wage taxes see those revenues deposited daily. Under the new system, it could take much longer for earned income tax money to be disbursed.

Each county or district collector will be overseen by members of a tax collection committee. That committee, which will have delegates from all participating taxing bodies, will have broad power to set policies for collecting and dispersing the revenues it collects, Mr. Hoffman said.

Among the important decisions each committee will have to make is choosing who will be the new collector of wage taxes.

The options include hiring a commercial firm, creating a new regional agency or assigning broader duties to an existing municipal tax office.

Each has advantages and pitfalls, said Mr. Bond, Monroeville manager.

A commercial firm might put too much emphasis on controlling collection costs, he said. The result might translate into limited business hours, an inadequate phone system and little knowledge of the local community, he warned.

Setting up a new agency, on the other hand, could mean high start-up expenses, he said, while giving regional duties to a local tax office could overwhelm existing staff.

"[District and county collection] should be a positive thing," Mr. Bond said. "But there are a few potholes you could hit getting there."

Some municipal officials are predicting more complete collection.

When people move to Pennsylvania, some are confused by the complexity of the state's multi-layered taxing system, Moon Manager Jeanne Creese said.

Since Moon attracts many new arrivals, Ms. Creese said, she fears her township and the Moon Area School District are missing out on significant wage taxes.

"I think there are quite a few taxpayers who slip through the cracks," she said.

Requiring employers to withhold wage taxes should reduce that problem, she said.

With fall deadlines approaching, municipalities and school districts have begun to select their delegates to the tax collection committees. Mary Abbott, tax office manager for Mt. Lebanon, will serve as her community's representative on the Allegheny Southwest Tax Collection Committee.

As president of the Pennsylvania Earned Income Tax Officers, Administrators and Collectors Association, she opposed Act 32.

But like other local officials, she pledged to do her best to implement it.

"Now that it has passed, we in Mt. Lebanon will do everything we can to make it successful," she said.