Tax and Budget

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.

State budget discussions have reached a critical point. The agreed-upon $350 million increase in education funding represents an important step towards the budget Pennsylvania needs. But while the latest proposal to extend the sales tax to more services would raise needed revenues, it would also place too much of the burden on Pennsylvania’s lowest-income families.

Even at the the 11th hour, lawmakers can achieve a better budget – one that reinvests in education and human services, raises adequate revenues in a fairer way, and strengthens families and communities. The Pennsylvania Budget and Policy Center calls on lawmakers to include the following eight proposals in a final budget fit for the holidays.

With ongoing negotiations over the state budget focused on property tax cuts, and the State Senate taking up a bill to eliminate property taxes, this briefing paper compares property tax elimination with two more targeted approaches that would reduce, but not eliminate property taxes: the Republican proposal that passed the Pennsylvania House in May (House Bill 504) and Gov. Wolf’s original proposal from March.

We find that property tax elimination would raise taxes on the middle class to give wealthy homeowners and businesses in wealthy communities a tax break. Both targeted approaches would be better for the middle class, but the Wolf proposal would be the best for moderate-income homeowners and would also cut non-residential property taxes the most in lower-income communities, a potential boost to community revitalization.

Senate Bill 76 would impose a foundational re-organization of the state’s taxation and educational systems, with potentially vast negative consequences for Pennsylvania’s schools, its workers and consumers, and the economy of the commonwealth.

 

HARRISBURG, Pa. – Nov. 18, 2015 Under a budget framework currently being negotiated by Gov. Wolf and legislative leaders, Pennsylvania’s sales tax would be increased to pay for property tax cuts. A new analysis, released today by the Pennsylvania Budget and Policy Center, found that the bottom 80 percent of Pennsylvania families – those earning less than $102,000 annually – would provide 63 percent of the revenue produced by raising the sales tax from 6 percent to 7.25 percent, as proposed.

Gov. Wolf and legislative leaders are currently negotiating over the terms of a plan to cut property taxes which would be financed by an increase in the state sales tax rate from 6% to 7.25%. This brief analyzes the size of the sales tax rate increase by income. It also compares that impact to how much different income groups would pay with an increase in the state personal income tax rate from 3.07% to 3.57%, as proposed by Gov. Wolf in October and rejected by the Republican legislative majority and nine Western Pennsylvania Democrats.

Organizations, representing advocates for education, combating hunger, the business, manufacturing, legal and banking communities, religious institutions and clergy, school districts and administrators, among many others, sent a letter to all state Senators, stating their opposition to Senate Bill 76.

On Tuesday, November 10th, Governor Wolf and legislative leaders announced a budget framework for 2015-16.  While an agreement could be good news, some key issues have not been addressed.

Monthly archive