A Fair Share Tax for Pennsylvania

Transcription

1 A Fair Share Tax for Pennsylvania

2 About the Pennsylvania Budget and Policy Center (PBPC) We are a Harrisburg-based nonpartisan, statewide policy research project that provides independent, credible analysis on state tax, budget, and related policy matters, with attention to the impact of current or proposed policies on working families.

3 Deficits Grow Without Action General Fund Ending Balance By Fiscal Year in millions of dollars (excluding long term implications of underestimate of human service expenditure) ,747-2,155-2,651-2,748 Source: Pennsylvania Budget and Policy Center based on Independent Fiscal -2,980

4 Deficits Grow Without Action General Fund Ending Balance By Fiscal Year in millions of dollars (including long term implications of underestimate of human service expenditures ,000-1, ,000-2,500-3,000-3,500-4,000-2,153-2,581 Total deficit that needs -3,097 to be closed in 2017 = -3, Billion Source: Pennsylvania Budget and Policy Center based on Independent Fiscal Office, Economic and Budget Outlook, Fiscal Years to ,469

5 Pennsylvania General Fund Expenditures and Revenues Are A Smaller Share of the Economy Today than in the Recent Past 6.00% Expenditures / GDP Revenues / GDP 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% Source. Pennsylvania Budget and Policy Center based on data from the Indepdent Fiscal Office

6 Pennsylvania General Fund Expenditures and Revenues as a Percent of GDP (nominal figures in millions) Pennsylvania General Fund Expenditures and Revenues as a Percent of GDP (nominal figures in millions) Fiscal years Expenditures / GDP Revenues / GDP Average 1994 to % 4.89% Average 2012 to % 4.49% Average 2016 to % 4.44% IFO Projections 2018 to % 4.34% Source. Pennsylvania Budget and Policy Center based on data from the Independent Fiscal Office

7 Employment in State and Local Government and the Private Sector

8 35% Corporate Taxes are Providing a Smaller Share of General Fund Revenue Over Time Taxes as a Share of General Fund Revenue 30% 25% 20% 15% 10% 5% 0% Source. Pennsylvania Budget and Policy Center based on Pennsylvania Department of Revenue, Bureau of Research, The Statistical

9 New Revenue in millions of dollars Recurring Revenue Non-recurring revenue Cigarette Tax 431 Tax amnesty 100 E-Cigarettes 13 Internet gaming* 100 Smokeless Tobacco 48 Liquor licenses 149 Roll you own Casino license fee- 3 Philadelphia* 50 Cap sales tax vendor discount 56 Table games license fee 25 Sales tax on digital downloads Tobacco settlement 47 transfer 29 Personal income tax on lottery winning 16 Volkswagen settlement 20 Bank shares tax 24 Balance transfers 37 Table games tax 2% increase 17 Loans from other funds 200 Minor tax changes Subtotal non-recurring (2) revenue 709 Education Improvement tax credit (25) Subtotal recurring revenue 627 Total 1,337

10 Impact of tax policy $1,500 $1,000 $500 New Tax Revenue New/Expanded Transfers One-Time Impacts Other 1, $ $ Source: Independent Financial Office Five Year Outlook, November 2016

11 Distribution of tax burden today

12 Incomes have become increasingly unequal in PA

13 In neighboring states taxes are fairer and those with higher incomes pay more than they do in PA Delaware Maryland New Jersey

14 In neighboring states taxes are fairer and those with higher incomes pay more than they do in PA New York Ohio West Virginia

15 Tax on income from wealth Bifurcate our current personal income tax: Income from wages and interest would continue to be taxed at 3.07% Income from wealth: dividends; net income (from a business, profession, or farm); capital gains; net income from rents, royalties, patents, and copyrights; gambling and lottery winnings; and income from estates or trusts, would be taxed at 4.5% Because income from wealth mostly goes to the very wealthy, the new 4.5% tax falls mostly on those with higher incomes.

16 Changes in tax by income group 4.5% tax on income from wealth

17 Changes in tax by income group 4.5% tax on income from wealth Change in Taxes by Income Group--4.5% tax on Income from Wealth Top 1% with incomes $426,000 and over $8,157 Next 4% with incomes between $184,000 and $426,000 $949 Next 15% with incomes between $95,000 and 184,000 $183 Fourth 20% with incomes between $60,000 and $95,000 $88 Middle 20% with incomes between $38,000 and $60,000 $48 Second 20% with incomes between $20,000 and $38,000 $18 Lowest 20% with incomes less than $20,000 $6 Source: Pennsylvania Budget and Policy Center (PBPC) based on Institute on Taxation and Economic Policy (ITEP) analysis

18 Geographic distribution of tax on income from wealth most rural counties pay little Figure 5. Because a 4% tax on the income earned from wealth primarily impacts the highest income families the revenue generated in each county is below the statewide average New tax revenue per family by county $300 $200 Statewide average revenue per family $140 $100 $0 Montgomery Chester Susquehanna Delaware Bucks Sullivan Bradford Greene Washington Wyoming Allegheny Lancaster Butler Centre Union Warren Cumberland Wayne Tioga Westmoreland Berks Lackawanna Northampton Lehigh Lycoming Mercer Snyder Indiana Mckean Erie Adams Blair Montour Crawford Franklin Potter Juniata Lebanon Jefferson Elk York Venango Clarion Dauphin Somerset Bedford Luzerne Lawrence Forest Pike Schuylkill Philadelphia Beaver Armstrong Clearfield Columbia Fayette Cameron Huntingdon Mifflin Monroe Clinton Fulton Northumberland Perry Cambria Carbon Pennsylvania Source. Pennsylvania Budget and Policy Center analysis based on tax data from the Pennsylvania Department of Revenue, House Democratic Appropriations Committee

19 Revenues from sales tax base expansion Sale tax base expansion Good s Servic es revenues in millions Aircraft 5.6 Airline Catering 0.8 Rental of films 22.4 Investment in bullion and coins 9.4 Catalogs and direct mail advertising 3.6 Dry-cleaning 36.6 Recreational parks 13.7 Spectator sports 73.6 Theater, dance 96.5 Amusement and recreation Museums, zoos 27.3 Total Source: Governor s Executive Budget, , pp, D46- D68

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21 How to raise $2.5 billion in new revenues, mostly from those who can afford it New Revenue Options Revenue Tax Change in (millions) Increase in tax rate on compensation and interest from 3.07% to 3.25% $495 Increase in tax rate on income from dividends, capital gains and other income from wealth to 4.5% $1,200 Expansion of income tax credit for those with low incomes ($120) Sales tax base expansion to goods and services mostly consumed by those with higher than median income $638 Low income sales tax credit ($300) Severance tax on natural gas of 6.5% with impact fee credit $218 Increase in minimum wage to $10.10 $225 Eliminate corporate tax loopholes though combined reporting and reduce rate initially to 8.99% and then further $200 so that CNI raises $200 million more Total $2,556

22 Another Approach: A Constitutional Amendment to Allow an Uniform Exemption (and Create a Higher Rate on the top 1%) Note: based on state income and tax revenues

23 Pennsylvania Budget and Policy Center Marc Stier, Director (215) John Neurohr, Communications Director (724)