Here’s why the COVID-19 pandemic should force a rethink on Pa.’s income tax | Ray E. Landis

April 23, 2020 6:30 am

I’ve written quite a bit about the problems facing older Pennsylvanians and the impact of those issues on the Commonwealth.

The demographic challenge of a population growing older, a broken long-term care system, and millions of Pennsylvanians unprepared for retirement are some of the concerns lingering for all of us. Now the COVID-19 pandemic has upended our world and amplified these issues, particularly as deaths mount in skilled nursing facilities.

It’s time to present ways to address this situation. And we should start with a simple reality check – the private sector is not going to lead us forward.

The current situation at corporate-owned nursing facilities should be enough to show that for-profit entities have not placed the welfare of a vulnerable population, and the front-line workers who care for those vulnerable individuals, ahead of their financial interests.

We’ll need to look to state government for help, but the economic downturn associated with the COVID-19 crisis has put the Commonwealth’s budget in dire straits.

A call to cut spending is going to be issued by many elected officials and others who oppose government involvement in their lives. But cutting spending will not address the needs of Pennsylvanians. A fair and adequately funded state budget is the approach the Commonwealth must take, and in order to get there, it is time to revise the income tax system in Pennsylvania to make it more equitable and better able to provide the resources necessary to support our population.

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Our constitutionally mandated flat tax system is antiquated and out of touch with the reality of 21st century economics. Growing income inequality and a flat tax allows wealthy Pennsylvanians to escape making contributions to the operations of state government at the level necessary to maintain critical Commonwealth operations.

We cannot address the needs of our society – whether it is fairly-funded education, adequate pay for those caring for our most vulnerable, or repairing our aging infrastructure – without revising our income tax system to ensure those who have most prospered in our system and who can afford a higher tax rate make a proper contribution.

The federal income tax system works this way, as do tax systems in neighboring states such as Maryland, New York, and New Jersey. Illinois, a state with a flat income tax and a fiscal crisis worse than any Pennsylvania has faced, overwhelmingly elected a Governor who ran with a fair tax system as the key to his platform.  His plan goes before voters there this fall.

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If Pennsylvania were to take this step, it too would need to be approved by voters, as it would amend our Constitution.

The process is long – a constitutional change such as this would need to be approved by the General Assembly in two consecutive sessions and then placed on the ballot.

A starry-eyed optimist would say, OK, it could be passed this year, then passed early in the new session next year, and then be voted on later in 2021.  The reality is the current General Assembly is not going to consider this issue under its current leadership.

This doesn’t give this year’s General Assembly a pass, however. The state budget debate in June is going to be very difficult.  Revenues have collapsed, and needs have grown. Efforts must be made to identify additional sources of revenue. Pennsylvania has never taxed retirement income.

Given many of the programs most in need of funding support older Pennsylvanians, taxing certain kinds of retirement income should be on the table. Social Security income should be exempt, but the taxing of retirement income above a certain threshold, perhaps $75,000, should be considered, as should ending sales tax exemptions on items and services other than food, clothing, and health care.

We are in very uncertain times. But we must not allow today’s crisis to absolve us from planning for the future and taking steps to ensure we will do what we can to give all Pennsylvanians an opportunity for a safe and secure life.

Voters in this fall’s election should know the views of candidates for the General Assembly regarding a fair and adequate state income tax system and vote for those who will provide the resources to allow the Commonwealth to address the needs of its citizens and, given how the General Assembly operates, select leaders who will allow this issue to be considered.

Opinion contributor Ray E. Landis writes about the issues that are important to older Pennsylvanians. His work appears biweekly on the Capital-Star’s Commentary Page. Follow him on Twitter @RELandis

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Ray Landis
Ray Landis

A former spokesman for the Pennsylvania AARP, Ray E. Landis writes about the issues that matter to older Pennsylvanians. His work appears biweekly on the Capital-Star's Commentary Page. Readers may follow him on Twitter @RELandis.