Pa. House Dems float ‘fair share’ fix to income tax | Friday Morning Coffee
Twenty percent of Pa.’s poorest families pay 14% of their income on state, local taxes, the lawmakers said
A quintet of Democratic lawmakers, hailing from Philadelphia, Allegheny and Lehigh counties, are floating a proposal that they say will level the playing field for Pennsylvanians who might still be stinging from paying their state income taxes a couple of weeks ago.
The ‘fair share’ plan sponsored by Reps. Chris Rabb, Elizabeth Fiedler, and Rick Krajewski, all of Philadelphia; Sara Innamorato, of Allegheny County, and Joshua Siegel, of Lehigh County, would tweak the state’s flat-rate, 3.07% income tax to make it less punitive for lower-income Pennsylvanians.
Citing research by the progressive Pennsylvania Budget & Policy Center, the lawmakers noted that 20% of the state’s families with the lowest incomes pay roughly 14% of their income on state and local taxes, while those in the top 1% only pay 6% toward those levies.
“It’s the height of absurdity that the bottom 60% of income earners are, on average, paying nearly double the tax rate of what the richest Pennsylvanians pay,” Rabb said in a joint statement released Thursday. “This legislation will not only make the tax system fairer, but it will work to reduce the overall budget deficit.”
While the state’s coffers currently are flush with cash, policymakers could be staring down the barrel of cumulative budget deficits totaling nearly $13 billion by fiscal 2027-28, according to a report the progressive think-tank released in February.
In March, the top Republican on the House Appropriations Committee warned that the state will face a massive budget deficit within three years under the $44.4 billion budget proposal Democratic Gov. Josh Shapiro rolled out in March, charging that it masks a structural deficit by drawing more than $2 billion from the state’s nearly $6 billion surplus.
In an April 14 memo to their House colleagues seeking support for their proposal, the Democratic lawmakers said they plan to introduce one of three variations of their tax fix:
- “Option One would raise $2.6 billion in new tax revenue. Under this plan, the personal income tax on wages and interest would decrease from 3.07 percent to 2.8 percent, and the income tax would increase to 6.5 percent on passive income from things like net profits, dividends, net gains derived from rents, royalties, patents and copyrights, gambling and lottery winnings and net gains derived through estates and trust.
- “Option Two would raise $6.22 billion annually by decreasing the income tax on wages and interest to 1.9 percent and increasing the tax on passive income to 12 percent.
- “Option Three is a middle-ground between the first two options, decreasing the income tax on wages and interest to 2.35 percent and increasing the tax on passive income to 9.25%,” the lawmakers said.
“People in our state work hard and deserve not to pay taxes that are unfairly high. For too long, the very richest Pennsylvanians have gotten away with not paying their fair share, because of our upside-down tax structure in Pennsylvania,” Fiedler said in the lawmakers’ joint statement.
“The Fair Share Tax Plan creates a tax system that works for working people: one based in fairness and equality. It’s time to make Pennsylvania work for everyone, and having a fair tax system is an important start,” Fiedler continued.
Assuming the bill clears the majority Democrat House, it may run into tough sailing into the Republican-controlled state Senate.
In an appearance before the Pennsylvania Press Club earlier this month, Senate Majority Leader Joe Pittman, R-Indiana, sounded wary of any prospect of reducing the state’s income tax levy.
“I think we’d have to be very careful about any conversation of a potentially big reduction,” to the income tax, Pittman said, responding to a question about Shapiro’s plan to offer tax credits of up to $2,500 to newly certified teachers, nurses, and police officers.
In the joint statement, Rabb sounded a more optimistic note.
“Everyone should pay their fair share,” he said.
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