Since 1990, Pennsylvania has gone from 24th in state and local tax burden to 11th. Yet Gov. Rendell has proposed another round of tax hikes—including raising the state Personal Income Tax, increasing the Cigarette Tax, and creating new taxes on other tobacco products and on natural gas extraction. This PolicyPoints looks at Pennsylvania’s tax burden in the national context.
TAX FREEDOM DAY
Tax Freedom Day is the day of the calendar year when Americans have finally earned enough money to pay all of their federal, state, and local taxes. The following table shows the dates to which Pennsylvanians had to work in 2009 in order to foot the bill.
- In 2009, Pennsylvanians worked 104 days—January 1 to April 14—just to pay their tax bill.
- Federal, state, and local taxes consume 28.5% of Pennsylvanians’ income (41% if federal deficit spending is added to the mix).
- Overall, Pennsylvanians will spend more of their income on taxes than they will on food, clothing, and housing combined.
- Pennsylvania has the 11th latest Tax Freedom Day in the nation.
|Date||Total Tax Burden||Rank|
|Tax Freedom Day 2009||Apr. 14||28.5%||11|
|Tax Freedom Day (Including Fed. Deficit)||May 30||41.1%||11|
|Source: Tax Foundation|
STATE AND LOCAL TAXES
While Tax Freedom Day considers all taxes, much of the variance amongst states is based on difference in federal taxes paid (which would vary with average incomes). State and local taxes, however, also very greatly among states.
- Pennsylvania taxpayers pay $4,463 per capita in state and local taxes, 10.2% of their income, as opposed to the national average of only 9.7%.
- Pennsylvania has the 11th highest state and local tax burden.
- Pennsylvania ranks 20th or higher in state and local total taxes, spending, property taxes, income taxes, corporate taxes, and debt per capita.
|Pennsylvania State and Local Taxes|
|Tax||Rate||Fiscal Year||Rank||Per-Capita||Fiscal Year||Rank|
|Total Tax Burden||10.20%||2008||11||$4,463||2009||11|
|Source: Tax Foundation|
Governor Rendell consistently states that Pennsylvania has the “2nd lowest” state income tax rate to justify his proposed tax hike. However, this is misleading, given that nine states have no income tax at all, and fails to consider Pennsylvania’s combined state and local tax burden, detailed above, which is what businesses and families have to deal with. However, even looking only at state taxes, Pennsylvania is hardly among the most competitive states:
- Pennsylvania ranks in the middle of the 50 states in total state taxes, revenues, and spending per capita.
- Pennsylvania has the 2nd highest Corporate Income Tax rate in the U.S. (combined with the federal tax rate, this is the 2nd highest rate in the world).
- Pennsylvania has the 13th highest sales tax rate, 10th highest gasoline tax rate, and 13th highest implicit tax on lottery sales.
|Pennsylvania State Taxes|
|General Sales Tax||6%||2009||13||$698||2009||29|
|Selective Sales Taxes||$469||2009||14|