Who to Believe on Wolf Tax Increase?

Friday, we pointed out a new Independent Fiscal Office (IFO) study that shows every income group will pay more in net taxes under Gov. Wolf’s proposed budget. In response, the Wolf administration criticizes the IFO’s methods and continues to insist that “the average family,” even one earning $100,000 would pay less.

Gov. Wolf’s short infographic shows a net tax reduction at all income levels, for families earning $36,000 to $100,000. The IFO’s analysis show that every income group would pay more, on net. We broke that down on a per taxpayer basis in the table below.

While those earning more than $100,000 per year would pay a lot more, households in the $50,000 to $75,000 brackets would also pay almost $600 more annually per household And households in the $75,000 to $100,000 bracket would, on the net, pay $838 more per taxpayer.

Tax Incidence for Pennsylvania Residents, FY 2018-19
Net tax increase by household income under Wolf proposed budget
Under $25,000 $25,000-$49,999 $50,000-$74,999 $75,000-$99,999 $100,000-$250,000 More than $250,000
Total tax increase (millions) $8 $316 $506 $461 $1,271 $1,009
Tax filers 3,856,350 1,428,370 858,100 549,840 696,296 174,063
Total increase per tax filer $2.07 $221.23 $589.67 $838.43 $1,825.37 $5,796.75
Sales and use tax increase $367 $616 $606 $512 $1,283 $721
Sales tax increase per tax filer $95.17 $431.26 $706.21 $931.18 $1,842.61 $4,142.18
Sources: Tax increases from Independent Fiscal Office:
Tax filers from IRS, SOI Tax Stats: http://www.irs.gov/uac/SOI-Tax-Stats-Historic-Table-2;
filers in the $200,000 to $250,000 range estimated using PA Department of Revenue, Personal Income Tax Statistics:

Instead of resorting to “liar, liar, pants on fire,” we thought we’d actually explain the big differences between the IFO’s analysis, and Gov. Wolf’s infographic.

1) The IFO includes all tax increases and reductions. In contrast, the Wolf analysis excludes the cigarette tax increase, new tobacco taxes, a natural gas severance tax, and other business taxes (some of which, like the Corporate Income tax, will reduce overall taxes). The tobacco taxes in particular hit lower-income households, but even excluding these, the IFO concludes all but the lowest income bracket (those earning under $25,000 per year) will pay higher taxes.

2) Wolf assumes much less in sales tax per family than the IFO. Wolf’s infographic shows that a family earning $36,000 per year would pay $206 more per year under the sales tax increase and expansion, and a $363 increase for a family making $100,000 per year.

The IFO analysis shows double to triple that amount—$431 per taxpayer earning between $25,000 and $50,000, and $931 per taxpayer earning $75,000 to $100,000.

The IFO and Gov. Wolf agree that the sales tax expansion will net somewhere in the vicinity of $4 billion per year from the sales tax increase and expansion. The IFO analysis accounts for who is paying this $4 billion, Gov. Wolf does not.

3) “Average Family” vs. all families. Wolf presents an infographic showing the “average family,” but assumes the average family doesn’t smoke or use tobacco products, and wouldn’t pay higher energy costs because of a natural gas tax.

It is very unclear what the “average family” buys in goods and services that would be taxed under the sales tax. Indeed, as we’ve pointed out numerous times, some of the big ticket items that will now be taxed alone exceed the “average” a family will pay. For instance, taxes on day care for an infant would run more than $700 per year. Taxes on home health care or nursing home care would cost on average $3,000 to $6,000 per year, respectively. Even funeral services would cost several hundred dollars more in sales tax under Wolf’s plan.

Of course, not every family pays these costs, but those who do will have a rough time finding a way to absorb the massive tax hike Gov. Wolf is offering them.

The impact on your family depends quite a bit on spending habits—and, as we’ve outlined, varies greatly depending on where you live. Nonetheless, the IFO’s study presents a better analysis of the tax impact on all families, because it measures the impact of all proposed tax increases, not just a select few.