New Report: What Pennsylvania’s Budget and Tax Policies Mean to You

Posted by on November 24, 2008

New Guide Sheds Light on Pa. Taxes, Impact of Public Investments

Your tax dollars collectively fund numerous public investments. They educate our children, keep our communities safe, build roads, and help operate transit systems. They provide health care for poor and disabled Pennsylvanians. They help businesses to be productive and the economy to grow.

But few of us understand how our tax dollars are spent or how Pennsylvania’s tax systems work. The Pennsylvania Budget and Policy Center wants to change that, with The Common Good: What Pennsylvania’s Budget and Tax Policies Mean to You, a new roadmap to taxes and public expenditures in Pennsylvania.

The easy-to-read handbook explains Pennsylvania’s state and local tax structures and how Pennsylvania’s budget is constructed. It challenges myths about Pennsylvania’s tax and spending levels by comparing the commonwealth’s spending and taxes to other states’ and examining how Pennsylvania spending and tax levels have changed over time.

You can learn more about this new resource for policymakers, journalists, advocates and all Pennsylvanians by clicking here.

Some Key Findings

• Pennsylvania ranks favorably when compared to the nation and to competitor states in overall tax and spending levels. In 2005, the commonwealth ranked 32nd nationally in state taxes as a share of state personal income, and 30th in state spending.

• Pennsylvania state taxes are relatively low, with a personal income tax that has the second lowest top rate in the country and a sales tax that is in the middle range of all states. The corporate net income tax rate is relatively high, but loopholes in the law mean few companies pay the tax.

• In 2005, Pennsylvania taxes were 6.3 percent of state personal income, a half-percentage point less than the average of competitor states.

• Pennsylvania’s state and local taxes are highly regressive, taking a significantly larger share of the incomes of the bottom fifth of earners than the incomes of more affluent Pennsylvanians.

• Pennsylvania’s local school districts shoulder a much larger share of funding for public education than most states. Pennsylvania, in fact, ranked near the bottom, 47th, in the share of state funding for public education. That creates school funding disparities across Pennsylvania’s 501 school districts, as local districts have to fill in the gaps.

A Fair Tax System? Not in Pennsylvania

Pennsylvania has one of the most regressive state and local tax systems in the country, with low-income Pennsylvanians, living paycheck to paycheck, paying much higher percentages of their income in taxes.

The poorest 20 percent of Pennsylvanians pay 12.3 cents out of every dollar of income in state and local taxes, compared to only 4.3 cents for the richest families. Middle-class families also pay a higher share of their income in state and local income taxes than the wealthiest 20 percent.

PBPC’s new publication offers recommendations to make the state’s tax systems more equitable and to raise adequate funds to sustain and improve state investments and services. These include a graduated income tax and an expanded Tax Forgiveness program. It also recommends the state grow the tax base by closing corporate tax loopholes, expanding the sales tax to luxury goods and to smokeless tobacco, and adding an extraction tax for natural gas and other natural resources.

Get Your Free Copy

The Common Good: What Pennsylvania’s Budget and Tax Policies Mean to You is an easy-to-read handbook that will help all Pennsylvanians better understand how their tax dollars are spent.

You can download a copy of the publication by clicking here,

or view a summary of the publication’s main findings by clicking here.

If you would like PBPC to send you a printed copy of the publication, click here to fill out a request form.

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