Who Pays Pennsylvania’s Personal Income Tax? Part II

Pennsylvania has a flat rate Personal Income Tax (PIT) of 3.07%, which is a fair and simple distribution of taxation.  Yet some people are imprudently calling for a state-wide graduated income tax, similar to the Internal Revenue Service (IRS).  In this blog series, I will highlight some real facts about Pennsylvania’s PIT.  Click here for Part 1, on tax collections by income bracket.

Part 2: Pennsylvania Tax Forgiveness

Advocates for a graduated income tax often claim the poor are unfairly taxed. Yet, as we revealed earlier, the bottom 50% of tax filers provided less than 10% of total taxable income in 2006. However this doesn’t tell the whole story, as low-income taxpayers are further alleviated through the Pennsylvania Tax Forgiveness Program.

Tax Forgiveness Schedule

Incomes below specified amounts receive 100% tax relief on income






















Source: Department of Revenue

The Pennsylvania Tax Forgiveness Program relieves low-income taxpayers from income tax obligations based on their salaries, marital status, and number of dependants. Consider the abridged forgiveness schedule on the right: individuals who fall below the listed incomes qualify for 100% tax relief, and those who exceed them can still qualify for partial relief.

This program is inclusive and generous to struggling taxpayers. For instance 22% of all tax returns in 2006 received tax forgiveness for an average relief of $243. In total, the state forgave a whopping $11.25 billion in taxable income for struggling taxpayers.

When considering the Tax Forgiveness Program in tandem with the flat rate, it becomes clear the current state PIT places the bulk of the tax burden on higher income households, while maintaining a low burden for struggling families.