Taxes

Pennsylvania Among 'Terrible 10' Most Regressive Tax States

By Chris Lilienthal, Third and State

Working families in Pennsylvania pay a far higher share of their income in state and local taxes than the state’s wealthiest earners, according to a new study by the Institute on Taxation and Economic Policy (ITEP).

Pennsylvania’s tax system scored so poorly that it made the list of the “Terrible 10” most regressive tax states in the nation.

The Pennsylvania Budget and Policy Center (PBPC) co-released the report, Who Pays? A Distributional Analysis of the Tax Systems in All 50 States, with ITEP. PBPC Director Sharon Ward made the point in a press release that "No one would deliberately design a tax system where low-income working families pay the greatest share of their income in taxes, but that is exactly the type of upside-down tax system we have in Pennsylvania.”

Middle-income families in Pennsylvania pay more than double the share of their income in taxes than the very wealthiest Pennsylvanians, while low-income families pay nearly three times as much as top earners, the report found. Get more details on the report, including a Pennsylvania fact sheet, here.

PA State & Local Taxes: Shares of family income for non-elderly taxpayers

The report should bury once and for all the myth of the makers vs. the takers. Low-income families in Pennsylvania are paying much more of their income in state and local taxes than the top 1%.

PA Revenue Strong Midway Through Year; Tax Cut Could Have Big Impact

By Michael Wood, Third and State

With a strong December showing, the commonwealth now has a General Fund revenue surplus of $171 million (1.4% above estimate) for the first half of the 2012-13 fiscal year, double the Corbett administration’s revised estimate for the entire fiscal year. The strong December collections exceeded estimate by $112 million (or 4.8%).

The increased revenue is a good sign of a modestly recovering national economy and a brightening of the state’s fiscal picture going into the 2013-14 budget season. This is a nice change from previous years when midyear shortfalls triggered cuts to state services.

In December, personal income, corporate, and realty transfer taxes exceeded revenue targets by 10.1%, with sales, inheritance and other taxes (on cigarettes, alcohol, and table games) falling short of expectations by 2.8%.  

A similar picture exists over the first half of 2012-13 — corporate, personal income and realty transfer tax collections are a combined 5% higher than expected, while sales, inheritance, and other taxes have fallen 2.4% short of budget estimates.

One area of concern is that sales tax collections (the state’s second largest tax source) are $125 million, or 2.7%, lower than projected. It is not clear the reason for this as vehicle sales and consumer spending have been increasing. Perhaps the new tax collections from some online retailers may not be as large as anticipated.

Compared to last year, collections are $583 million, or 5%, higher, with corporate ($254 million) and personal income tax ($186 million) collections making up most of the increase in 2012-13.

What to Make of the Fiscal Cliff Deal?

By Sharon Ward, Third and State

Tell us what you think about the Fiscal Cliff deal. Take our two-question survey.

The agreement reached by President Obama and Congress on January 1 was both historic and disappointing — and it leaves much unsettled. The urgency of the Fiscal Cliff has dissipated, but significant threats remain to federal funding for state and local services as well as refundable tax credits for low-income working families, Medicaid, Medicare and Social Security.

There is much to dislike in this agreement. It makes permanent most of the Bush era tax cuts, ensuring that income from dividends and capital gains will be taxed at a lower rate than income from work. It makes permanent the estate tax but locks in a tax rate that creates a huge windfall for the top 0.3% of households. Sequestration cuts — the automatic spending cuts that members of both parties hated and the President said would not occur — have been postponed for two months, with three-quarters of FFY 2013 cuts ($85.6 billion) and $109 billion in annual cuts after that still in law through 2022. The President’s line in the sand on raising tax rates for the top 2% of earners got pushed way back, with top rates kicking in at $400,000 for an individual and $450,000 for a couple. A low-wage earner might need 20 years to make that much.

Pennsylvania Tax Giveaways and an Island in the Sun

By Jamar Thrasher, Third and State

A few weeks ago, the Pennsylvania General Assembly fast-tracked a bill in the waning days of the legislative session to allow certain private companies to keep most of the state income taxes of new employees. News reports to follow indicated the new tax giveaway was designed to lure California-based software firm Oracle to State College.

Well, it turns out the CEO of Oracle, which will benefit from the largess of Pennsylvania taxpayers, recently bought his very own Hawaiian island, as CNN reported back in June.

Oracle CEO Larry Ellison, the third richest man in the U.S., purchased about 98% of Lana'i, the sixth largest of the Hawaiian islands. Forbes reported that the deal was rumored to be worth $500 million.

As CNN tells us:

The island includes two luxury resorts, two golf courses, two club houses and 88,000 acres of land, according to a document filed with the Public Utilities Commission.

Which bring us back to Pennsylvania, where Governor Corbett recently signed House Bill 2626, allowing qualifying companies that create at least 250 new jobs within five years to pocket 95% of the personal income taxes paid by the new employees. 

A Rare Victory In The Endless Fight Against Corporate Welfare

By Mark Price, Third and State

In a rare victory against corporate welfare in Pennsylvania, Ahold USA has withdrawn its request for property tax breaks for a meat-packaging facility it is building in Lower Allen Township, Cumberland County.

As Michael Wood explained before the request was withdrawn:

Pennsylvania Hunger Games Diet: Cash for Corporations, Cuts for Kids

By Mark Price, Third and State

On Tuesday Marty Moss-Coane, the host of WHYY's Radio Times, moderated a question-and-answer session with Governor Tom Corbett at an event sponsored by the Greater Philadelphia Chamber of Commerce. The Governor ran wild with analogies.

Corbett repeated a folksy analogy to the business suit-and-tie audience, saying that state revenue amounted to an eight-inch pizza pie before the 2008 financial crisis. Now, he said, it’s a six-inch pie “but with the same mouths to feed.”

Moss-Coane noted near the end of the hour-long conversation that Corbett could hear demonstrators beating drums and chanting slogans outside. What would he say to them, she asked.

“I understand that you’re upset because we’ve had to put the state on a diet, for want of a better description,” Corbett said. “I haven’t met anybody who likes to go on diets. It is not easy. It is not what we want to do.”

Multi-tasking with the 1% … killing the schools AND making the poor pay for their funeral.

I showed here how we could raise $94 million for the School District from the property tax, as requested by the Mayor, and sequester it until the SRC abandons its privatization plan. But is the property tax the best place to get the money? If the City raised the $94 million from some other source, it could still sequester it until the SRC sees the light.

The 1% generally likes the property tax. It’s a regressive tax that falls most heavily on people who are property-rich, cash poor. How sweet it would be to make poor and working people not only pay more, but to make them pay more for destruction of one of their greatest assets, the public school system.

There has been dispute, however, whether a property tax increase as it’s been packaged this year would indeed hit poor people the hardest.

Some progressives think that a property tax increase this year would not be regressive because it would emerge out of the AVI initiative intended to correct the massive inequities in City property assessments. But even if assessments were accurate, and didn’t under-value richer neighborhoods, poor property owners would still get hit hardest from tax rate increases. It’s just the nature of the property tax. It taxes at a single rate that the rich can pay much easier than the poor.

AVI, if done right, is a good thing. Increasing rates, however, to generate more revenue from the tax, might still not be.

Let the Games Begin: PA Senate Announces Details of Budget Proposal

By Sharon Ward, Third and State

Action on the state budget began in earnest Monday with state Senator Jake Corman, chairman of the Appropriations Committee, releasing important details on the Senate budget plan that will be advanced this week.

The proposal would increase Governor Tom Corbett's budget proposal by $500 million, with total spending rising from $27.15 billion to $27.65 billion for 2012-13. The Senate plan rejects $191 million in fund transfers and new revenue and proposes new spending cuts of $165 million. Those spending reductions were not yet detailed.

According to a Capitolwire.com report (subscription required), the Senate budget plan:

Good News on PA Revenue But Don’t Count Your Blessings Just Yet

By Sharon Ward, Third and State

Pennsylvania’s Independent Fiscal Office (IFO) released its revenue estimate this week, offering a more upbeat view of the economy moving forward. The official revenue estimate predicts a smaller revenue shortfall for the current year and more robust revenue collections for 2012-13.

The IFO estimate leaves the General Assembly with as much as $800 million available to restore cuts proposed by the Governor. This is clearly good news, but both the Corbett administration and legislative leaders are already dampening expectations about the scale of funding restorations.

A Look at the Numbers 

In the current 2011-12 fiscal year, the Corbett budget pegged revenue at $27.1 billion, with a revenue shortfall of $719 million. The IFO estimates revenue collections will be $419 million higher, at $27.5 billion and a shortfall of $300 million for the fiscal year. With $700 million in current-year reserves, this leaves an actual year-end surplus of around $400 million.

In the 2012-13 fiscal year, the IFO predicts revenue at $28.7 billion. This is approximately $404 million higher than the Corbett budget (the IFO excludes $142 million in new revenue sources proposed by the Governor in his budget plan, since those measures have not yet been enacted). See a table with more details.

PA Revenue Picture Brightens

By Michael Wood, PA Budget and Policy Center

Pennsylvania tax collections came in better than expected in March, lowering the state's total revenue shortfall for the current fiscal year. It was also the first March ever in which tax collections exceeded the $4 billion mark. 

With three months left in the 2011-12 fiscal year, the revenue shortfall stands at $387 million, much lower than the year-end revenue shortfall of $719 million estimated by the Corbett administration and built into his 2012-13 budget.

General Fund Revenue Shortfall

This should be welcome news as lawmakers move closer to negotiating a 2012-13 state budget. Improved collections may signal a less severe year-end shortfall, and that could help reduce some of the painful cuts proposed in the Governor's budget. Get the Pennsylvania Budget and Policy Center's full revenue analysis here.

March is an important revenue month for a number of reasons. For one, almost half of corporate tax collections for the year were collected last month. And corporate taxes exceeded monthly estimates by $106 million, or nearly 5%, last month. This played a big role in creating a March revenue surplus of $95 million.

After the strong March collections, every major tax type now exceeds year-to-date tax collections this time last year. Taxes are now $583 million higher than they were at the end of March 2011 — a sign of the improving economy.

Tax Breaks Vs. Budget Cuts

By Chris Lilienthal, Third and State

Right now in Harrisburg, there is a debate going on over whether the state should make more cuts to schools, universities and protections for our children and grandparents. Unfortunately, the Governor has put forth a budget that would do just that.

The chart below from Better Choices for Pennsylvania compares existing tax loopholes with funding cuts that could be restored by closing loopholes. In each case, additional revenue could help fund vital services without raising taxes on the middle class.

As Economy Picks Up, PA Revenues Take Turn for the Better

A blog post by Michael Wood, originally published at Third and State.

After months of falling short of targets, Pennsylvania's General Fund tax collections edged past the monthly estimate in February by $16 million, or about 1%. The good showing was driven largely by higher-than-expected personal income tax collections. Corporate tax collections continued to trail estimates.

The improving revenue picture for both January and February may signal that tax collections (other than corporate levies) have taken a turn for the better. There have been many signs of a growing economic recovery, including a decrease in the unemployment rate, which bodes well for many state tax streams in the second half of the 2011-12 fiscal year.

February collections trimmed the revenue shortfall for the fiscal year to $482 million, or 3%. Tax collections for the fiscal year trail estimates by $449 million.

Compared to the prior fiscal year, total tax collections are up $507 million, or 3%, as of February — another sign that the economy is improving.

Fiscal Year to Date Tax Collections Trail Estimates, Still Growing Over Prior Year

Before we break out the champagne, the continuing — and largely self-inflicted — shortfall in corporate tax collections is a cause for concern.

Corporate taxes fell 13% short of estimate in February, bringing the shortfall for the year to just under $300 million, or 18%. Much of the corporate tax shortfall can be laid at the feet of the Corbett administration's February 2011 decision to adopt the federal "bonus depreciation" — something Pennsylvania previously had not done.

PA Budget Summit: Resources and a Recap

The Pennsylvania Budget and Policy Center hosted its annual Budget Summit on Thursday in Harrisburg, providing an in-depth look at the state and federal budget plans and what they mean for communities and families across Pennsylvania. With nearly 200 in attendance, it was our largest Budget Summit yet.

Check out our web site where we have posted materials from the Summit, including presentations on the state and federal budgets. And check back next week when we will have more, including video clips from the Summit.

And take a minute to watch this report from Fox 43 for a nice (and quick) recap of the Summit.

From the Fox 43 report:

Educators, political candidates, and community leaders gathering to discuss how Governor Corbett's proposed budget would affect them at the Pennsylvania Budget Summit.

"The ultimate goal is for everyone in this room to understand what's happening in Harrisburg. To be able to talk to their lawmakers intelligently, and bring their messages back to their communities to get involved, and speak up about the things that they value," says Sharon Ward with the Pennsylvania Budget and Policy Center.

White House Plan to Close Special Interest Tax Loopholes Is the Right Approach to Reform, But Details Matter

The President has put forward the beginnings of a tax reform plan that takes the right approach, but is still missing critical details.
 
America needs a level playing field where businesses succeed by being more productive and innovative, not by hiding profits in the Cayman Islands or other tax havens. By ending special-interest tax preferences, the administration plan could help the economy and reduce debt, while addressing public outrage about large companies dodging their taxes.
 
The current system serves nobody except the relatively few companies that can most exploit these loopholes and the armies of tax lawyers and lobbyists that must be hired to play this destructive game.”
 
The President’s plan includes very promising proposals. If the details include reforms such as complete reporting of all profits and taxes paid, clear cut rules to end profit shifting to bogus off-shore subsidiaries and enforceable minimum rates to deter tax avoidance gamesmanship, then this plan will fulfill its promise.
 
Preventing firms from sheltering profits overseas will encourage companies to keep their business here.  We were encouraged to see some of the revenue raised put toward clean energy. We urge that loophole closing is pursued aggressively and that additional revenue will be put toward some combination of reducing the public debt and reducing severe cuts to public priorities.

Some Hope for PA Revenue in January but Corporate Taxes Still Lag

A blog post by Michael Wood, originally published at Third and State.

Pennsylvania’s revenue performance has been pretty uneven this fiscal year due in part to a stubbornly slow growing economy and to policies that have cut the tax bills of big profitable corporations. After months of significant revenue shortfalls, however, January provided some hope.

General Fund collections came in close to estimate in January – falling $10.2 million, or 0.5%, short of monthly targets. This is a marked improvement over the previous several months, when revenues fell between 3% and 6% short of estimate. Get my full analysis of the January revenue numbers here.

January is an uneventful month for most revenue streams, with personal income tax collections being the exception. January is second only to April, when tax returns are due.

Corporate collections continued to fall significantly short of estimate in January and account for more than half of the General Fund’s revenue shortfall so far in 2011-12.

Revenue collections for the 2011-12 Fiscal Year are $497 million, or 3.5%, below the Corbett administration’s revenue estimates. The administration is now projecting a year-end revenue shortfall of $719 million, although the Independent Fiscal Office (IFO) believes this to be too pessimistic, based on recent economic trends. The IFO expects the year-end shortfall to be in the $500 million range.

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