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.
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.
Over the past 48 hours, news report have trickled out about a tentative budget agreement between Republican legislative leaders and the Wolf Administration. Lacking the information for a full analysis, we will instead lay out criteria for evaluating any budget deal; assess what the early information indicates about the likelihood of this tentative budget agreement meeting these criteria; and suggest how the negotiators might improve the budget framework as they further develop its details.
Dr. Stephen Herzenberg, executive director of the Pennsylvania Budget and Policy Center, released the following statement in response to today’s vote in the state House of Representatives on Gov. Wolf’s revenue package:
"Pennsylvania needs a fiscally responsible 2015-16 state budget that reinvests in education and raises the revenue needed to balance the state books. That would be easier to do with a drilling tax, which voters support.
HARRISBURG, Pa. – Oct. 7, 2015 -- A diverse coalition of groups -- including unions, human service organizations and environmental and educational advocates – urged members of the Pennsylvania House of Representatives to vote today for Gov. Wolf’s revenue package. At a 10 a.m. press conference in the Capitol Rotunda before the vote, speakers said the commonwealth needs more revenue to reinvest in education, restart the state’s economy, fund vital programs for vulnerable Pennsylvanians and balance the budget.
The Pennsylvania Budget and Policy Center urges members of Pennsylvania’s House of Representatives to support the revenue package coming up for consideration today in their chamber. Voting for the package requires both political courage to do the difficult but right thing and common sense to see the obvious. Pennsylvania needs more revenue coming in to meet its obligations, close its structural deficit, protect its vulnerable citizens and make the kind of investment in education that voters want and every school child deserves.