New Details on Proposed Tax Increase

As movement towards a budget deal progresses, more details have emerged regarding the sales tax increase we reported on yesterday.

Let's remember that before we ask working families to pay more, we need to address substantive fiscal reforms. This includes meaningful pension reform, real liquor privatization, and strong controls on property taxes.

The proposal calls for increasing the state rate to 7.25 percent—a 21 percent increase. Under the new tax rate, the state would collect about $2.1 billion more from consumers, or about $650 more per family of four.

All of this revenue would be used for property tax relief. In exchange, about $616 million in gambling money currently going to property tax relief would be redirected for additional spending (reportedly dedicated to pension payments). This results in a reduction in property taxes of about $470 per homeowner.

On net, this represents a tax increase of $190 per family of four.

The new sales tax rate of 7.25 percent would rank as the second highest state rate in the U.S., according to Tax Foundation data. Several states rank higher when considering the average of state and local tax rates.

However, Pennsylvania would have a higher state rate than any of its neighbors, with only New York having a higher combined state and local tax rate.

Philadelphia, which would have a 9.25 percent rate, and Pittsburgh (8.25%) would have among the highest tax rates in the region.