The tax system in Pennsylvania ranks 9th worst in the nation due to its regressive nature, hitting low and middle income residents the hardest. These are the findings of a new study conducted in Washington, D.C. by The Institute on Taxation and Economic Policy (ITEP).
The results indicated that the poorest 20% of Pennsylvania families earn less than $19,000 each year and pay 11.3% of their income in state and local taxes. Middle income earners, those earning between $35,000 and $56,000, pay 9.6% of their income in such taxes, while the richest pay only 5%. Once these numbers are adjusted for federal deduction offsets the results are 11.2%, 9.1%, and 3.9% respectively.
ITEP concluded that the flat tax Pennsylvania uses to tax its resident’s income instead of a graduated rate contributes to its unfairness. Especially when it does little to offset the inherently more regressive sales and property taxes.
It remains to be seen if Pennsylvania will make changes to the current tax structure. If the residents and their state representatives ask for changes to increase equality there are various options that could be implemented. Implementing a graduated rate is an obvious choice and may be favorable considering Pennsylvania has the 2nd lowest top rate among all states with an income tax. Alternatively, Pennsylvania could increase the income tax rate on investment income, primarily earned by more affluent residents, or delve into the corporate realm and consider adding a combined reporting element to its corporate income tax.
You can find a copy of the ITEP report “Who Pays?”here.
Founded in 1980, the Institute on Taxation and Economic Policy (ITEP) is a non-profit, non-partisan research organization, based in Washington, DC, that focuses on federal and state tax policy. ITEP’s mission is to inform policymakers and the public of the effects of current and proposed tax policies on tax fairness, government budgets, and sound economic policy. ITEP’s full body of research is available at www.itepnet.org.
{ 0 comments… add one now }