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IFO: Everyone Pays More Under Wolf Tax Shift
The Independent Fiscal Office (IFO) released a new analysis of Gov. Wolf’s tax proposals yesterday. What is their most interesting conclusion? Taxpayers in every income bracket will see a net tax increase.
The table below breaks down the incidence of tax changes by 2018-19, the first full fiscal year in which all of Wolf’s proposals would be in effect.
| Tax Incidence for Pennsylvania Residents, FY 2018-19 | ||||||
| Net tax increase by household income under Wolf proposed budget, in millions | ||||||
| Under $25,000 | $25,000-$49,999 | $50,000-$74,999 | $75,000-$99,999 | $100,000-$250,000 | More than $250,000 | |
| Tobacco | $126 | $149 | $93 | $80 | $78 | $26 |
| Sales and Use | $367 | $616 | $606 | $512 | $1,283 | $721 |
| Personal Income | $29 | $270 | $303 | $268 | $713 | $658 |
| Property | -$274 | -$472 | -$438 | -$352 | -$680 | -$284 |
| Philadelphia Relief | -$58 | -$77 | -$61 | -$48 | -$100 | -$64 |
| Renter Rebate | -$202 | -$185 | -$8 | $0 | $0 | $0 |
| Corporate Net Income | -$25 | -$45 | -$41 | -$35 | -$87 | -$75 |
| Bank Shares | $1 | $2 | $2 | $2 | $4 | $4 |
| Net Severance tax | $44 | $56 | $47 | $34 | $60 | $23 |
| Total | $8 | $316 | $503 | $461 | $1,271 | $1,009 |
| Source: Independent Fiscal Office: http://www.ifo.state.pa.us/resources/PDF/Revenue_Proposal_Analysis_April2015.pdf | ||||||
The IFO offers another look at tax incidence excluding tobacco taxes—which impose a significant burden on lower-income households. If, for whatever reason, you wanted to exclude an analysis of the burden of tobacco taxes, the lowest income group (households earning less than $25,000) would see a net tax reduction, but taxpayers in every other income category would still see a net tax increase.
That is, middle class families will pay more, even after Wolf’s promised property tax reductions.
This finding shouldn’t be surprising. As we noted, using Gov. Wolf’s own revenue projections, only 30 cents of every dollar collected in new state taxes during the first two years of the plan go to property tax relief. Even if we ignore the tax implications of the governor’s first budget, in which families will pay higher state taxes before seeing any property tax reduction, Wolf’s tax shift proposal raises twice as much revenue in new state taxes than it provides in school tax relief.
It should also be noted that Wolf’s tax shift provides an arbitrary system of doling out money to school districts. The amount of money your family could get in property tax relief depends—with quite dramatic differences—on where you live.
The IFO analysis delves specifically into the unique case for Philadelphia. Under Wolf’s plan, Philadelphia, unlike any other school district, would see a reduction in its local cigarette tax, sales tax and wage tax along with property tax reductions.
Gov. Wolf has been trying to sell his budget by making a remarkable claim: Everyone will receive these great benefits, but only the wealthy will have to pay for them. The IFO analysis demonstrates otherwise. Not only will the wealthy pay, but low-income and middle class families alike will be hit hard under the governor’s plan.