We often hear about how Pennsylvania’s tax laws are a burden for existing businesses and a red flag for those considering setting up shop in the Keystone state.
That kind of talk is common when politicians or bureaucrats are arguing for a new tax break, credit or loophole designed to favor an industry or entice a corporation or retain a company that’s eyeing greener grass somewhere outside the commonwealth.
Oftentimes those making the argument get the tax relief they or their proxies have sought. And in some cases it even produces a job or two or 20 or 100, though rarely as many as they’ve predicted.
What we don’t often hear is anything about how the state’s tax laws shake out when it comes to the cash that individuals must cough up each year for the privilege of living in Penn’s Woods.
Maybe that’s because Pennsylvania has one of the most regressive state tax systems in the U.S. and the poor and working class folks that it hurts the most don’t have very good lobbyists.
A recent study put out by the Institute on Taxation and Economic Policy -- a "non-profit, non-partisan research organization" -- ranks Pennsylvania as the 8th most regressive tax state in the nation.
The commonwealth’s “terrible ten” status is based on data that indicates the poor and middle class pay a much larger percentage of their annual income in state and local income, sales, property and excise taxes than the rich do.
Those taxes eat up about 12 percent of the poorest Pennsylvanians’ annual income. Middle class folks see about 9.8 percent of their income siphoned off by the government while the infamous 1 percenters only put about 4.4 percent of their large incomes into the public coffers.
The institute reports the following:
• The state’s flat income tax rate takes the same chunk out of everyone’s paycheck, which sounds fair on paper, but the $1,100 someone earning $30,000 a year sends to Harrisburg hurts a lot more than the $37,000 that somebody who makes a million owes the state. (And chances are that guy has a guy who knows a way to cut that bill down.)
• Property taxes hit the poorest hardest, representing nearly 4 percent of their income, while the richest families pay out around 2 percent of theirs to stave off a sheriff’s sale.
• Sales taxes on just about everything but clothes and food and excise taxes added to the cost of gas, booze, smokes, cellphone service, firearms purchases and vehicle registration are the most regressive of all the taxes levied on Pennsylvanians. They eat up about 5.7 of the poorest Pennsylvanian’s income, 3.7 percent of middle class folks’ and less than 1 percent of the wealthiest households’.
The institute’s findings are worth thinking about in an era when the politicians in Harrisburg are reworking the state’s tax code to accomodate business people who think that Pennsylvania isn’t friendly enough for their tastes.
Somewhere in the calculations and policy prescriptions being bandied about, one wonders if anyone is considering how friendly the tax system is to workaday citizens who may not pay as much in dollars and cents as their better-off neighbors but bear its burden much more heavily.