PA Taxes

The tax on sugar-sweetened beverages (SSBs) proposed by Mayor Kenney, also known as the “soda tax,” is controversial mainly because, like other sales taxes, it takes a greater share of the income of poor families than rich ones. However, while the costs of the soda tax fall more heavily on those with low incomes, more of the benefit of the tax will go to low-income Philadelphians as well, for two reasons:

The first benefit of the tax flows from how the new revenue will be spent — on pre-K education, community schools, and parks and community recreation centers. Pre-K education helps kids from low- and moderate-income families have a better start in life. Studies have shown that children who attend pre-K programs score higher on academic tests and that these benefits are greater for those whose families have lower incomes. And the effects of Pre-K education are long lasting: long-term studies have shown that those who receive Pre-K education have higher IQs at age 5, have higher high school graduation rates, are more likely to own a home and have higher incomes at age 40.

 

This briefing paper analyzes several options for raising revenue for the Pennsylvania state budget which would fall much less on middle- and low-income families than the existing Pennsylvania state and local tax system.

In his budget address, Governor Wolf observed that Pennsylvania faces a choice of two paths. Taking one path would require us to deal with the reality of our structural deficit and raise revenues to close it. It would enable government to continue to meet its responsibilities to educate our children, serve those who need our help, protect the environment and encourage economic growth. Taking the other path would require us to accept devastating cuts to education and health and human services.

The ideas in this document were compiled by the Pennsylvania Budget and Policy Center based on our own work and that of our partner, the Keystone Research Center, and that of advocates on many issues. The names of our partners are in our letter to the Governor and the members of the General Assembly.

Budget numbers are always difficult to understand, not least because those with different perspectives can present the numbers in sharply different, but honest ways. In the context of the state’s still-unfinished 2105-16 budget, this brief presents a series of careful “apples-to-apples” comparisons of the three budgets in play in Harrisburg last year: Governor Wolf’s budget proposal, the Republican budget and the bi-partisan budget agreed to by Governor Wolf and the leaders of the Democratic and Republican parties in the General Assembly.

As of December 10, 2015, the 2015-16 Pennsylvania Budget is still not done. Two different budgets are now before the General Assembly. In this brief, we provide an overview of the differences between the two budgets, looking first at critical differences in spending for education and human services, then at the impact of those differences, and finally at some subtleties in how the two budgets organize  and present certain spending choices they have in common and how this affects the bottom line budget numbers

It appears that legislators have decided to raise new, and necessary, revenue by expanding the sales tax base to include more goods and services instead of increasing the sales tax rate. There are good reasons to broaden the base of the sales tax, if it is done in ways that make the tax more equitable. But a broader sales tax is still likely to fall more heavily on low-income families. Legislators can limit the burden on those least able to bear it by coupling the sales tax expansion with a new refundable sales tax credit.

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