Pennsylvania’s Tax Code is Hideously Regressive

Pennsylvania’s crazy regressive tax code is an issue I think it would be worth picking a Constitutional amendment fight over:

Pennsylvania is one of the “Terrible Ten” states with the most regressive tax structures nationwide, hitting the poor hardest while taking the least from the rich, according to a newreport from the liberal Pennsylvania Budget and Policy Center (PBPC) and the Institute on Taxation and Economic Policy [...]

Poor Pennsylvanians effectively pay 12 percent of their income in state taxes, middle-income people pay 9.8 percent, and the top 1 percent pay 4.4 percent, the study finds. That means that low-income Pennsylvanians pay taxes at rates nearly three times as high as their 1 percenter counterparts [...]

Pennsylvania, according to the study, has the ninth-highest tax rate on the poor of any state nationwide. And they don’t get much for their money: Gov. Tom Corbett has cut public basic and higher education by $1 billion, heavily cut into county programs for the poor and disabled, and entirely eliminated cash General Assistance welfare.

The flat income tax is in the state Constitution, so if we want to create some higher tax brackets then we have to pass a bill in two consecutive sessions, and win a statewide ballot referendum.

Politicians don’t like to take on protracted multi-session fights like this, but the messaging on this one is very clear (should rich people pay more of the taxes than poor people?) and it’s totally winnable. What’s more, this is an issue that Democratic challengers could organize around for the next decade. Progressives can make this a litmus test for the Governor primary, and use it to primary out craven or conservative Democrats.

(Thanks: Daniel Denvir)

Comments

  1. John says:

    Won’t happen, but I hope some Democrat gets behind this – makes it easier to segregate out the loons.

    The problem is not in the wage tax Jon, it’s that sales taxes are notoriously regressive and PA’s structure is penal, especially in the big cities that you love so much.

    I trust you had the same reaction when Philly increased its sales tax instead of hitting workers with a higher wage tax? A 100% Far Left Liberal Democratic city chose to bend poor people over instead of hiking the wage tax…..

    • Jon Geeting says:

      Read the report. State relies too much on sales taxes and the flat wage tax. The wage tax could have a progressive rate structure. And there’s no reason a consumption tax can’t be progressive. They just designed the current sales tax to be regressive. You could tax people on the difference between their income and their savings, and then let people deduct the first 25-30K. You can add a progressive rate structure to tax very expensive purchases at a higher rate.

      The reason they didn’t raise the wage tax in Philly is that the wage tax is already really high. Their local tax is too heavy on wage and sales taxes, and too light on land. That’s why so many of the white collar jobs in the region are outside the city proper. After AVI is implemented, they need to pass tax reform that drastically lowers taxes on wages, business privilege, use and occupancy, and sales and raises most city revenue from land taxes.

  2. John says:

    Philly has to increase revenues substantially, their unfunded pension liability is $5 billion last I saw. Go figure, costs go up in the cities….

    Your consumption plan would be disastrous to the economy – you’re talkig about providing a tax incentive to take 2/3 of the economy to not spend. Savings are important, but a 25-30% savings rate would be crippling.

    It also never fails to amaze how you miss very basic points. Philly needs to make a value proposition that it’s worth increasing everyone’s commuting costs, commuting time and tax rates by locating in Philly instead of, say Conshohocken. Note that taxes are 1/3 of the equation.

    Philly is a great town, but there is no reason at all for anyone to locate downtown unless they have to – and even that is disappearing quickly.

    • Jon Geeting says:

      Savings = investment. I would rather trade more investment for less luxury consumption, which is what would be taxed most heavily under my preferred plan.

      Center City has been seeing population increases for the first time in decades over the past 2 years, and they’ve also seen more businesses locating downtown. What the increase in population means, I think, is that fewer companies will have to assume most of their employees are commuting in from homes outside the city. If most employees live and work within the city, then the time and money costs of transportation are lower. There are ways to reduce the costs to businesses and their employees. They can shift away from fare-based funding for SEPTA, they can replace business and wage taxes with land taxes, and they can add more types of structures to the list of what can be built by-right.

  3. John says:

    2 years doesn’t make a trend you can bank on. Any business that makes a long term decision based on such weak statistics (as you apparently are) deserves what will happen to them.

    Honest to God Jon, don’t you test or challenge anything? Are you that naive?

    • Jon Geeting says:

      Regardless of whether you think that trend will continue, nothing changes about the right course of action for Philly. Tax what can’t move, and get away from taxes on stuff that can move across local political jurisdictions.

  4. John says:

    Actually no – you’re coming at it all wrong.

    Sell the hell out of what you have going for you, come at it from strength. Coming at it with taxes is from weakness.

    I meant it, Philly is a great town, it needs to do a much better job selling why you want to be there. Turn that 2yr trend into a 5yr trend and you’re on to something.

    Do that, then you’re also growing revenues and have a chance to fix the financial issues.

  5. Richard Rider says:

    Bogus study. The poor don’t pay taxes.

    They get more in direct subsidies than they pay in tax. EITC, food stamps, free cell phone, utility discounts, free school lunches, health care, housing assistance — the list goes on and on.

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