Skip to main content
Category

Blog Post

As Fair Share America Launches, New Poll Shows Pennsylvanians Support Higher Taxes on the Ultra-Rich and Big Corporations

By Blog Post, Press Release

As Fair Share America Launches, New Poll Shows Pennsylvanians Support Higher Taxes on the Ultra-Rich and Big Corporations

As Pennsylvanians Together brought a group of 25 Pennsylvanians to Washington, D.C., this week to take part in the September 18th launch of “Fair Share America,” a new, national campaign for tax justice, the organization released the toplines of a new national / state poll carried out by Data for Progress.

Results for each of Pennsylvania’s congressional districts, state House districts, and state Senate districts will be released soon.

The campaign will work both nationally and within individual states to ensure that wealthy individuals and profitable, multinational corporations pay their fair share of taxes. If they do so, federal and state governments will have the revenue they need to take bold steps toward fully and fairly funding education, reducing the cost of health care and housing, and helping families that are struggling to take care of children.

Likely Voters in Pennsylvania Toplines

Profitable corporations are not paying enough in state taxes ………………..………………………. 76%

The wealthiest households are not paying enough in taxes ………………………………………….  76%

Taxes should be increased for households earning more than $400,000 per year ………….….….  77%

Child tax credits should be increased ……………………………………………………………………. 72%

Methodology

From August 6 to August 13, 2024, Data for Progress conducted a U.S. national survey of 8,017 likely voters using web panel respondents to gauge voter support for state and federal action to fund public programs and hold profitable corporations and the wealthy accountable to pay their fair share of taxes. The sample was weighted to be representative of likely voters by age, gender, education level, race, and geography. The survey was conducted in English.

By matching survey results to the list of registered voters in congressional districts, Data for Progress was able to create a model for every district in Pennsylvania using a statistical technique called MRP (multi-level regression with poststratification).

For a complete explanation of the methodology and more information about the data, please copy this link and paste into your browser’s search field: chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://pennpolicy.org/wp-content/uploads/2024/09/dfp_sra_mrp_2024_release_tabs.pdf

###

September 19, 2024

New Census Data Shows Failure and Success of Pennsylvania Public Policy

By Blog Post, Press Statements

The annual release of census data is often a guide to policy success and failure at both the national and state levels. This year is no exception. The American Community Survey data released yesterday shows that Pennsylvania’s failure to raise the minimum wage has led to our state falling behind the rest of the nation in measures of poverty and household income. But our early participation in the Medicaid expansion, along with new federal subsidies in the health care insurance marketplace has led to a reduction in the percentage of people uninsured in our state.

Poverty data points to the continuing failure of Pennsylvania to raise the minimum wage. The standard poverty rate in the United States fell from 11.5% to 11.1% between 2022 and 2023. But it rose slightly in Pennsylvania from 11.8% to 12% although that increase was not quite outside the margin of error of .3%. It is troubling that poverty remains higher in Pennsylvania than in other states and that it increased in the last year during a time of tight labor markets. The most likely explanation of our higher-than-national poverty rate is the failure of the Pennsylvania General Assembly to raise the minimum wage above $7.25. Pennsylvania remains one of only 16 states not to raise its minimum wage above that federal level. (Sources: For national data, U.S. Census Bureau, Official Poverty Rates by Age: 2009 to 2023. For state data, U.S. Census Bureau, American Community Survey 1-Year Estimates, Table S1701, Poverty Status in the Past 12 Months for 2023 and 2022.)

Another data series also points to the same failure of public policy in Pennsylvania. While the nation saw a small, but statistically significant, drop in median household income, adjusted for inflation, of .2%, the decline in Pennsylvania was statistically significant and six times greater, -1.3%. It was also greater than the states that surround Pennsylvania. Again, the static minimum wage in Pennsylvania likely accounts for our state falling behind the national average. (Source: Katherin Engle and Kirby G. Posey, “Household Income in States and Metropolitan Areas: 2023,” American Community Survey Brief ACSBR-023, US Census, September 2024.)

Pennsylvania’s lower minimum wage reduces household income and directly increases poverty by holding down wages. More than 20% of workers in the state would see an increase in their wages if we were to institute a $15 per hour minimum wage. A low minimum wage also depresses consumption and economic activity in the state. Because minimum wage earners spend almost all they make, an increase in the minimum wage to $15 per hour would raise consumption in the state by more than $5 billion.

Census data on the share of the population that is uninsured points to a continued success of Pennsylvania policy—our early adoption of the Medicaid expansion under the Affordable Care Act, as well as the increase in subsidies for health insurance in the marketplace under President Biden. The percentage of people without insurance fell both nationwide and in Pennsylvania. According to ACS data from 2019 to 2023, it fell from 9.2% to 7.9% nationwide and from 5.8% to 5.4% in Pennsylvania. (Source: U.S. Census Bureau, American Community Survey 1-year Estimates, Table S2701, Selected Characteristics of Health Insurance in the United States for 2023 and 2019.)

September 13, 2024

What Project 2025 Means for Pennsylvania Taxpayers

By Blog Post, Policy Briefs, Policy Report

If the federal government in Donald Trump’s potential second term were to adopt the tax proposals in Project 2025, low- and moderate-income Pennsylvanians would pay far more in taxes than they do now and the top 1% would pay much less.

That should worry Pennsylvanians. For, if we follow the letter of what Project 2025 proposes, a family of four at the state median family income level of $119,000 would pay an additional $7,167 in taxes. And a family of four with an annual income of $50,000 would pay an additional $7,031 in federal taxes. But a family of four that just breaks into the top 1% of Pennsylvania families, with $750,000 in income, would pay $12,675 less in federal taxes.

If, contrary to what Project 2025 explicitly says, we assume that earned income and child tax credits are not repealed, the increase in taxes for a family of four with $119,000 in income would be only $3,167, while the increase for a family of four with $50,000 in income would be $1,040. A family of four with an income of $750,000 would still receive a huge tax cut of $12,675.

And note that these changes in paid taxes do not include the proposed limit on the deductibility of employee benefits, including paid health care, discussed below. That limit would raise taxes for many middle-income Pennsylvanians. Also not included in the analysis are reductions in the tax rate on capital gains and corporate profits, which would reduce taxes for the top 1%.

Recognizing the danger of the extreme Project 2025 agenda on taxes and other issues for his political prospects, Donald Trump has disavowed knowledge of or support for Project 2025. But alumni of Trump’s first administration wrote much of it. If one looks at the connections between Trump and the authors of Project 2025, it’s likely that a second Trump administration would certainly be staffed and guided by those who wrote the plan.

More importantly, the tax proposals in Project 2025 are even worse than what Trump sought and achieved with his 2017 tax cuts. The 2017 tax cuts were heavily tilted to wealthy multinational corporations and to the rich, who received a disproportionate share of the benefits. The Project 2025 tax proposal would add additional tax cuts for those who already pay too little but would raise taxes on those with low and moderate incomes.

So, let’s take a closer look at why the Project 2025 tax proposals lead to results so harmful to low- and moderate-income Pennsylvanians, while helping those at the top, first with regard to individual taxes and then corporate taxes. Keep in mind that there are limitations to how precise our analysis can be, both because the Project 2025 proposal is not terribly detailed and because the precise implications of some of their proposals require a far more detailed analysis than we can do for this preliminary report.

Individual Taxes

Currently, there are seven marginal rates in the federal income tax: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. These tax rates are tied to inflation-adjusted federal income tax brackets. And remember that a marginal tax rate means that a taxpayer pays that rate only for income above the threshold for their tax bracket. For example, for couples filing jointly, the 12% rate applies to annual income over $23,200 and below $94,301. The 32% rate applies to income above $383,900 but below $487,451. The 37% rate apples to income over $731,000.

Project 2025 proposes a reduction of our seven personal income tax rates to two, an initial one at 15% and a second one at 30% beginning at the “social security wage base,” which is currently $168,600 (Project 2025, p. 696.) It also proposes to “eliminate most deductions, credits and exclusions.” It’s not totally clear whether that means eliminating the standard deduction since the document also says that the goal of the plan is to create a “nearly flat tax on wage income beyond the standard deduction.”  For the purpose of this brief, we are assuming that the standard deduction would remain unchanged. And because Project 2025 is not as clear as it should be about whether the Child Tax Credit and Earned Income Tax Credit would be repealed, we are analyzing the impact of Project 2025 under both scenarios.

Just looking at the changes in tax rates it is clear that Project 2025 would place a greater burden on low-income families, making our tax system less fair. Raising the rate on the lowest two tax brackets from 10% and 12% to 15% raises taxes for everyone, but it disproportionately hurts families and individuals with income below $94,000. Meanwhile, setting the highest rate at 30% benefits households that currently pay marginal rates at 32% or above—that is those with income over $383,900.

There are other tax changes proposed by Project 2025 that would harm many low- and moderate-income households. The plan calls for capping tax-free employee benefits at $12,000 per family. That would raise taxes for families receiving a variety of employee benefits and especially health insurance benefits.

In 2022, 54.5% of the population had health insurance that was paid for in part by their employer. The percentage has historically been a little higher in Pennsylvania. According to the Kaiser Family Foundation Employer Health Benefits survey, in 2023 the average employer health plan for families cost $23,968 of which the employee paid $6,575 and the employer paid 17,303. If tax-free employee benefits were capped at $12,000, then the average employee would have to pay taxes on the difference between $17,303 and $12,000—that is, $5,393. At the 15% rate, that means an average additional tax burden of $809. Project 2025 says that capping tax-free employee benefits is justified to eliminate the tax preference for employees receiving benefits instead of wages. But it does not admit that any shift in compensation from tax-free benefits to wages will lead to higher taxes for working people.

Because not all families received employer-paid health insurance, this amount is not included in our estimates of the burden of the Project 2025 tax plan. But it would hurt roughly half of all Pennsylvania families and individuals.

Another change in individual taxes excluded from our calculations is a proposed reduction in the highest tax rate on capital gains from 20% to 15%. Of course, this change would overwhelmingly benefit families with the highest incomes.

Finally,  Project 2025 also calls for creating universal savings accounts, similar to Roth IRAs, that would allow all taxpayers to set aside up to $15,000 per year in income, which would accumulate tax-free. The plan would allow reduce taxes only for families that can afford to save some of what they earn. But low- and moderate-income families and individuals can afford to save very little of their income. Studies of household saving rates show that the bottom 90% of households by income typically save around 4% of their income. But people in the top 1% save about 38% of their income, while those in the 90th to 99th percentile save at roughly a 12% rate. So, a universal savings plan—like much lower marginal tax rates for high-income families—largely benefits the well off.

Corporate Taxes

When it comes to corporate taxes, the Project 2025 plan is also tilted heavily to wealthy corporations. And since the wealthiest 10% of Americans own 93% of corporate stock, they will be the main beneficiaries of the proposed reduction in the corporate tax rate from 21%—which is already far below the 35% it was before the Trump tax cuts of 2017—to 18%.

Project 2025 also calls for the United States to withdraw from the international agreement to create a minimum 15% tax on corporations. As the plan recognizes, this agreement was meant to stop countries from competing against one another to draw businesses—or at least shell companies that serve to hide corporate profits—to their shores. Most economists believe that this competition is a problem because this “race to the bottom” discourages countries from asking corporations to pay a reasonable share of taxes. Corporations benefit a great deal from government. They ship goods—and their workers arrive—on roads, bridges, and railroads and in planes that land at airports that are paid for with public dollars. Those workers secure the education and training they need to be productive at the public’s expense. They benefit from government research dollars that are responsible for new, productive processes and products, including the internet, which now plays such a critical role in business. Yet when corporations do not pay their share of the cost of those goods, then families—the same families that are already paying for the goods and services they purchase from those corporations—must pick up the slack. The result is that corporate profits increase, and that redounds to the benefit of the already rich people from the top 10% (and overwhelmingly from the top 1%) who are stockholders.

What for most economists is a bug of international competition is a feature in Project 2025. A race to the bottom is what they want, precisely because it will lead to greater rewards for corporations and those who own them.

Other Provisions

Finally, Project 2025 has two other important tax policy proposals.

The first is to roll back President Biden’s increase in funding for the IRS. Nothing shows the Project’s fundamental concern for the well-being of the wealthy than this action. New funding at the IRS has already collected more than $500 million in unpaid taxes from fewer than 2,000 delinquent millionaires. And at the same time, average taxpayers find that customer service at the IRS is much improved. A reduction of funding at the IRS would diminish its enforcement activity, which is almost always directed at millionaires and above—because that is where the money is.

The other general tax proposal is to enact by legislation, or possibly constitutional amendment, rules to prevent Congress from raising taxes without a three-fifths majority in both the House of Representatives and the Senate. Creating this barrier to higher taxes would make it more difficult to meet the ongoing and future needs of the country and its people. We can’t always say today what our needs will be in the future. But we should not hamstring the ability of the federal government to meet those needs. And there are two future issues that we recognize today and that will require new taxes: making up for shortfalls in the Social Security and Medicare trust funds. If Congress can’t raise new revenue to extend the life of those trust funds, we will see cuts to both Social Security and Medicare in the not-too-distant future.

Conclusion

In sum then, we can see why former President Trump wants to disavow Project 2025. When it comes to taxes, as well as many other issues—including the right to reproductive health care and the checks and balances between the president and Congress—Project 2025 is a threat to the well-being of average Pennsylvanians.

September 5, 2024

Penn Policy Statement on President Biden’s Withdrawal

By Blog Post, Policy Briefs, Press Statement

Joe Biden’s truly selfless act today exemplifies the authentic leadership that has made him the most effective Democratic President since Franklin Roosevelt.

Under very difficult political circumstances, with a bare majority in Congress and in an extremely divided country, his legislative record was extraordinary.

In just four years, President Biden led the way in the enactment of

  • an economic recovery program that brought us back from the pandemic recession and led to the fastest economic growth and lowest unemployment rate in the world, as well as a relatively quick return to slow price growth.
  • the boldest program to address climate change in the world.
  • the largest plan to rebuild our public infrastructure since the New Deal.
  • an effort to support a high-technology economy that is built on well-trained union workers.
  • a health insurance plan that has reduced costs for hundreds of thousands of Pennsylvanians and millions of Americans.
  • an expansion of tax credits that cut child poverty in half which, sadly, Republicans refused to renew after two years.

At the same time, President Biden has been a bold supporter of labor organizing and he pointed towards a revision of our tax system that asks the ultra-rich and corporations to pay their fair share.

We do not endorse candidates or political parties. But we hope we can all recognize the extraordinary achievements of President Biden.

 

July 21, 2024

Response to the 2024–25 PA State Budget — Education Funding

By Blog Post, Policy Briefs, Press Statements

July 11, 2024

Governor Shapiro and the members of the General Assembly have had about 18 months to respond to the Commonwealth Court ruling that Pennsylvania’s system of funding K-12 education is unconstitutional. And Pennsylvania politicians have had decades to recognize that far too many low-income and Black and brown schoolchildren have not received an adequate education, which has limited their opportunities and denied the Commonwealth the full flowering of their talents and abilities.

The K–12 budget that we expect to be enacted soon recognizes the problem. But it does not put the state on a path to solving it.

It recognizes the problem in two ways.

First, for the first time in our history, the school code embraces a formula that quantifies the problem. The school code says that school districts need $4.5 billion in new funding to adequately and equitably fund our schools. Because of an unfortunate change in how poverty is counted, this amount is somewhat less than the $5.1 billion we believe is truly needed by our school children. But it remains a substantial number.

Second, again for the first time in our history, the General Appropriation bill directs the majority of new K–12 funding to the school districts that are least well-funded. This includes $493 million in the Ready to Learn line item and $60 million in the Basic Education Funding line item that is directed to 11 school districts that are especially underfunded.

These two new initiatives are major achievements.

However, this new spending meets only a bit more than 10% of the total needed to give every child the opportunity he or she needs. And, unlike the House-passed bill HB 2370, the new school code does not set a timeline for filling 100% of the adequacy gap.

We have been calling on the General Assembly to finish the job on school funding. The budget legislation they will soon pass takes up the job. But it is very far away from finishing it.

It is important for the people of Pennsylvania to understand why we have come so far but still have so far to go.

We have come so far because our political leaders understand that more than 70% of Pennsylvanians recognize the need for substantial new funding of our schools. And in the last four months, tens of thousands of them have contacted their state senators, representatives, and Governor Shapiro to let them know that they stand with our children and the future of our commonwealth.

We have come so far because House Speaker Joanna McClinton and Majority Leader Matt Bradford and the other leaders and members of the House and Senate Democratic caucuses have been champions for our kids.

Why does this budget not put the state on a path to meeting its constitutional and moral responsibility to fund our schools? Even though they did not appeal the Commonwealth Court decision, Senate and House Republicans have never put forward a plan to meet their obligation under it. They rejected the Basic Education Funding Commission’s plan. And they have sought to whittle away at Democratic legislative proposals and reject a complete plan to fund our schools adequately and equitably.

We are glad that Republican leaders have agreed to the achievements we noted above but they have refused to go further and accept the long-term plan our kids and the Constitution of Pennsylvania require.

So, while we believe Pennsylvanians should appreciate the important steps forward in the budget this year, we note with sadness that unless Governor Shapiro and the General Assembly enact a plan to fully and fairly fund our schools, another generation of our school children will be denied their constitutional and moral right to an adequate and equitable K–12 education. And not just our kids, but all Pennsylvanians, will suffer as a result

Click HERE to learn how much your school district will receive.

 

July 11, 2024

Statement: PPC Opposes Senate School Voucher Bill 1280

By Blog Post, Press Statements

The Pennsylvania Policy Center stands in opposition to Senate Bill 1280, which would force Pennsylvania taxpayers to give billions in handouts to private and religious institutions with virtually no accountability.

After failing to enact a state budget for FY 2024–25 by the deadline of July 1, Pennsylvania Senate Republicans sent a clear message today that they continue to prioritize giving handouts to the wealthy and diverting public funds to private and religious schools over fully and fairly funding our public schools.

On Wednesday, July 3, the Senate Finance Committee is scheduled to consider SB 1280, a new voucher tax credit bill that would cost taxpayers initially about $2.3 billion next year and more in future years.

We oppose SB 1280 because

  • it diverts $2.3 billion in desperately needed funding for our public schools to an ill-conceived voucher program that most Pennsylvanians oppose.
  • it is too small to help low- and moderate-income students attend a private school and would disproportionately benefit relatively well-off families who already have children enrolled in private academies. (Nationally, twice as many parents with incomes over $75,000 send their kids to private school than parents with incomes below $75,000.)
  • it provides absolutely no accountability for the funds spent, giving taxpayers no assurance that the schools receiving these funds provide an adequate education.
  • it allows private schools receiving these funds to continue to discriminate on the basis of race, gender, and sexual orientation, religious and political beliefs of parents, and whether a student is pregnant or has a child, as many private schools in the state already do.
  • it is unfair to Pennsylvanians based on where they reside, as the benefits of this program would largely go to parents and students in areas of the state where there are many private schools, leaving rural families with few options to utilize the vouchers.

Senate Bill 1280 would cost $2.3 billion. It comes just weeks after the PA Senate passed a tax cut with a $2.7 billion price tag for fiscal year 2024–25 that mainly benefits the wealthiest Pennsylvanians.

If SB 1280 is passed, Senate Republicans will have demonstrated that the state has sufficient funds to meet our moral and constitutional responsibility to adequately and equitably fund our schools.

And yet, the Senate still has no plan do that.

Neither the voters nor the courts of Pennsylvania will approve of this failure in priorities.

July 3, 2024

Statement: What We Are Looking for in a Budget Agreement

By Blog Post, PA Budget, Press Statement

The Pennsylvania state budget is now officially late. By all reports, however, House and Senate negotiators, as well as the governor’s office, are working diligently to reach an agreement. We are not concerned by a brief delay as we know that the issues under consideration are complex and that necessary compromises are difficult in a divided government.

We do want to set out some criteria by which we will evaluate a successful compromise.

  1. Enactment of a plan to meet our constitutional and moral responsibility to fully and fairly fund our schools, along the lines proposed by the Basic Education Funding Commission and with first-year funding at the level proposed by Governor Shapiro.
  2. A limited tax cut directed toward the Pennsylvanians who most suffer from our upside-down tax system, ideally by instituting a state piggyback on the federal earned income tax cut.
  3. Enactment and funding of the Grow PA program which would provide scholarships of $5,000 to Pennsylvanians attending a wide range of public and private colleges in fields where there is demonstrated need for more trained workers.
  4. A short path to a minimum wage of $15 per hour with a cost-of-living increase.
  5. New funding for violence-reduction strategies that have been working in Philadelphia and around the state.
  6. Operating subsidies for public transit.

A substantial new investment in the Whole-Home Repairs program.

We have not commented on the Grow PA program before, which was first proposed by Senator Scott Martin and received unanimous support by the full Senate and the House Education Committee. This proposal has many similarities to a plan called The Pennsylvania Promise, which our previous organization developed in 2018 and Senator Vincent Hughes and Representative Jordan Harris introduced at that time. It also has similarities to Governor Wolf’s Nellie Bly scholarship program. We are gratified that Senator Martin has embraced this set of ideas and has championed them along with other Republican and Democratic senators and House members. While the current plan is not as extensive as some of the earlier proposals, it is a good step in the right direction. And it shows that if Democrats and Republicans focus on the critical needs of the state, they can overcome partisan division and enact proposals that will benefit not just the recipients of these scholarships but, by contributing to economic development in the state, all of us. We hope it is a model for a budget that encompasses the five proposals listed above.

 

 

 

July 1, 2024

K–12 School Funding in PA Remains Inadequate and Inequitable

By Blog Post, Policy Briefs

Year after year, our predecessor organization and many others have released research showing both that the vast majority of Pennsylvania K–12 school districts are underfunded and that school districts with a high share of students who come from impoverished families or are Black or Hispanic are disproportionately among them.

That analysis was accepted by Pennsylvania Commonwealth Court judge Renée Cohn Jubelirer, who ruled that Pennsylvania’s system of K–12 school funding is unconstitutional.

And yet, with less than a week to go before the fiscal year 2024–25 budget is due, there are still members of the General Assembly who refuse to accept these basic facts.

So here we put forward our most recent update of the data we have provided in the past: estimates of the per-student funding gap in Pennsylvania’s five hundred K–12 school districts divided based on the share of students who live in poverty or who are Black or Hispanic.

Click here to read full screen or print.

June 26, 2024
Picture of the PA State Capitol building

From Work to Wealth and Back Again

By Blog Post, Policy Briefs

From Work to Wealth and Back Again

Americans suffer because we reward wealth more than work.

 Here’s how we got here and how we can create an economy

that works for all of us.

Introduction

The pursuit of tax justice is now central to the work of both the Pennsylvania Policy Center and our advocacy arm Pennsylvanians Together. It is also the theme of our People’s Budget Summit this year.

In developing this campaign, we needed to pull together a lot of research about  the history and politics of economic and tax policy over the last forty years.  Our executive director has been working on a long paper that surveys this broad topic, which should be read for release by the end of the summer.

He was far enough along, however, to give a 15-minute talk previewing the main themes of the paper at our People’s Budget Summit in early June. This is a revised version of the talk. It’s a little dense, but in just seven pages it gives a overview of how and why the rewards for wealth have jumped in the U.S. and rewards for work have shrunk in our economy over the last 40 years, as well as what we can do to reverse direction.

This is, of course, a huge topic. The paper borrows ideas from others with a few twists of ours own, especially in the political analysis of why the shift from work to wealth took place and what we can do to reverse it.

We would love to hear your thoughts on this early version of our project.

Click here to read the report full screen, download or print.

 

June 25, 2024

Testimony to the Philadelphia Tax Reform Commission

By Blog Post, Policy Statement

Our executive director, Marc Stier, presented this testimony at the first public hearing of the Philadelphia Tax Reform Commission on June 17, 2021. Stier is also the senior advisor to the advisory committee to the Commission.

This testimony sets out a range of questions that we believe the Tax Reform Commission should answer in its work.

Click here to read full screen, print or download.

[pdf-embedder url=”https://pennpolicy.org/wp-content/uploads/2024/06/Tax-Commission-Testimony.pdf” title=”Tax Commission Testimony”]
June 21, 2024

Create a State Earned Income Tax Credit in 2024!

By Blog Post

In our first post in this series, we argued that if the Pennsylvania General Assembly chooses to cut taxes in the budget that begins on July 1st, it should limit the cut to less than $1 billion per year and focus the benefits of the cut on low- and moderate-income Pennsylvanians.

There is one plan that meets both of these criteria perfectly: a state earned income tax credit.

The federal earned income tax credit (EITC) is a program that puts more money into the pockets of low- and middle-income families by giving them a credit against the taxes they pay. It was a program created by the Nixon administration and expanded under subsequent Republican presidents. It has traditionally been supported by Republicans who believe, correctly, that it encourages and makes it possible for people with low incomes to enter and stay in the job market.

No federal program, other than Social Security, reduces poverty as much. Twenty-nine other states have expanded the benefits of a federal EITC by enacting a state EITC. Pennsylvania should follow their lead. A state EITC is a relatively inexpensive program. And it is a program that would be easy to implement.

The federal earned income tax credit gives workers a credit against their taxes. And the credit is refundable, which means that even if they pay no taxes they can still receive the benefit. The tax credit begins when workers earn their first dollar and increases to a maximum income of about $12,000 for a one-worker family with one child and about $17,000 for a married couple with three children. Then it gradually declines when families hit a higher threshold, so there is no benefit cliff.

The state tax credit is simple to claim and administer. We propose that Pennsylvania’s earned income tax credit be set at 30% of the federal credit. Claiming it would require taxpayers to simply enter their federal tax credit on one line on the PA-40 tax form, which would be done automatically by tax software.

The program would benefit 1.45 million families in the state. The average tax cut for those who receive it would be $773. Almost all of EITC benefits—88.5%—would go to Pennsylvania families earning less than $52,100 (and those above that level who received any benefit typically have three or more children). The average income of those who receive EITC benefits is $27,500.  Roughly 40% of the families who would benefit from a state EITC do not currently benefit from the state’s tax forgiveness program.

While it would be a good idea to increase the benefits and lift the income limits on the state’s Tax Forgiveness program, the state EITC would provide greater benefits to families with lower incomes because it is refundable.

We estimate that a Pennsylvania earned income tax credit would cost the state $775 million.

An additional benefit of the state earned income tax credit is that it would encourage more families who are eligible for the federal EITC to claim it—right now, about 15% of those who are eligible fail to do so. An added incentive to claim the federal credit could bring about $43 million federal dollars into the state that are now left on the table.

June 14, 2024
a bar chart showing what different income levels pay in state and local taxes

Should We Cut Taxes in 2024–25, and If So—How?

By Blog Post

In response to a Senate vote in favor of a small reduction in the personal income tax rate and the gross receipts tax on electricity, we pointed out that this is not the right time to be reducing taxes in Pennsylvania.

At the moment, the state has a substantial budget surplus of more than $13 billion—but we need that surplus for two purposes. First, we are currently using it to pay the state’s operating expenses and will continue to do so because annual expenditures exceed annual revenues by more than $3 billion.

Second, the state has serious needs that require additional investment. To start with, we will eventually need an additional $6–$7 billion per year to meet the constitutional and moral responsibility to adequately and equitably fund K–12 education. And then there are critical needs in both pre-K and higher education and workforce training, transportation infrastructure (including public transit), and environmental protection.

So, we believe that the best fiscal policy right now is to add modest new tax revenues as we gradually run down the accumulated $14 billion surplus. Adding sources of revenue now will extend the life of the surplus, putting off the day when even more tax revenue is needed. And, with continued economic growth, it is possible that higher revenues generated by existing and new taxes would enable us to avoid a moment of crisis when we would have to choose between large substantial budget cuts or substantial new revenues.

However, neither party appears ready to start dealing with the coming fiscal crisis this year. And Senate Republicans might insist on some tax reduction in exchange for supporting the critical education funding we must pass this year.

If we do cut taxes, should we adopt the Senate Republican plan?

We do not think the Senate Republican plan is a good idea for two reasons.

First, we believe that any tax cut should provide far more relief for low- and moderate-income Pennsylvanians than wealthier Pennsylvanians. As we have shown before, Pennsylvania’s state and local taxes are upside-down, with the fourth most regressive tax system of any state. The top 1% of Pennsylvania households, with an averagea income of $1.9 million, pay 6% of their income in state and local taxes, while families in the middle of the income distribution, with incomes between $47,800 and $81,899, pay 11.4% of their income. Meanwhile, families in the bottom 20% of the income distribution, with incomes below $22,100, pay 15.1% of their income in state and local taxes, the highest rate for that group in any state in the country.

Figure 1

Source: Carl Davis, et. al., Who Pays? A Distributional Analysis of the Tax Systems in All 50 States, 7th Edition, Institute on Tax and Economic Policy, January 2024, https://sfo2.digitaloceanspaces.com/itep/ITEP-Who-Pays-7th-edition.pdf.

Because of our flat tax, a half-point reduction of the PIT would reduce taxes for the top 1% of taxpayers by $5,435 per year. It would reduce taxes for the middle 20% of families by only $181 per year. And because of the tax forgiveness program, it would most likely not reduce taxes for people in the bottom 20% by more than $20 per year.

Second, for the reasons mentioned above, tax reduction should be limited.

The Republican tax plan to cut the personal income tax rate by half a point and eliminate the Gross Receipts Tax on electricity reduces state revenues by $2.711 in fiscal year 2025–26. We believe this should be upper limit for any combination of new spending and tax reductions in that year. And, since carrying out the seven-year education funding plan would itself cost $2 billion per year by the second year of the plan (2025–26), any tax reduction should be limited to about $700 million per year.

Some Republicans have suggested that cutting taxes does not harm the long-term fiscal prospects of the state. This is untrue. The impact of a recurring reduction in taxes on the state’s fiscal condition is no different than a recurring increase in spending. A reduction in revenues and an increase in expenditures of the same magnitude reduce a budget surplus or increase a budget deficit to the same extent.

Comparing the Impact of Tax Cuts and New Spending (a little wonky!)

It is true that a tax cut can have a positive, short-term impact on economic growth because households would have more money to spend and thus would consume more. But an increase in education spending of the same magnitude would also lead directly to greater consumption. And since some portion of a tax cut for wealthy families is saved not spent, additional state spending will lead to more consumption than a tax cut for the wealthy of the same magnitude.

There is also some long-term benefit from cutting personal income taxes as it may lead some people or businesses to move into the state. But the effect of a small change in income tax rates is likely to be minimal. A large body of evidence suggests that small differences in tax rates have little impact on where individuals or businesses locate, especially when we are considering moves across state lines. And spending more on K-12 education has been shown to increase long-term economic growth in two ways. Higher K-12 spending leads to better educational outcomes which in turn leads to higher wages. And better educated workers attract business development.

Given the current state of economic research, we think that the long-term benefits of increased spending on education are likely to be greater than that of a small reduction in the personal income tax rate. But the evidence at this point is certainly not conclusive.

One thing is fairly clear, however: the direct, long-term economic benefits of increased spending on education are likely to benefit current Pennsylvania children, whose long-term prospects are raised by securing a better education. And improvements in K–12 education might also lead businesses attracted by our better educated workforce to move into the state and they might bring newcomers as well. If reducing taxes leads to people and businesses moving into the state new Pennsylvanians, not current residents would receive the direct, long-term benefits. And people moving into the state to take new jobs are likely to be better off economically than low-income Pennsylvania kids who suffer from inadequately funded schools. (Of course, the indirect multiplier effects of both tax cuts and educational improvements would benefit existing and new Pennsylvanians.)

So, from the point of view of economic justice, there is no question that meeting our constitutional responsibility to adequately and equitably fund our education system is more desirable than a tax cut that does not fix our regressive tax system.

And similarly, a tax cut that disproportionately benefits low-income Pennsylvanians would be better than one that benefits high-income Pennsylvanians.

Our next two blog posts consider tax proposals that provide greater benefits to low-income Pennsylvanians. The first examines a state earned income tax cut. The second looks at two other ideas: an extension of the property tax and rent rebate program to those under the age of 65.

June 14, 2024

Statement on House Passage of HB 2370 for 7-Year Education-Funding Plan

By Blog Post, Press Statements

FOR IMMEDIATE RELEASE

June 11, 2024

Contact: Erica Freeman, Deputy Director of Communications, Pennsylvania Policy Center (267) 496-5253

Marc Stier, executive director of the Pennsylvania Policy Center, released the following statement on the passage of HB 2370:

“The children of Pennsylvania, and especially those who live in poor, Black, and brown communities, have waited decades for the Pennsylvania General Assembly to meet its moral and constitutional responsibility to fully and fairly fund K-12 education.

With the passage of HB 2370 with bipartisan support today, the Pennsylvania House passed a seven-year plan to attain that goal. We call on the Senate to follow the lead of the House and pass this bill as well and send it to Governor Shapiro for his approval.”

June 11, 2024

Speech by Marc Stier — Education Funding Rally at the Capitol

By Blog Post, Speech

The data is clear. The Courts have ruled. The defendants in the case didn’t appeal the decision.

This Commonwealth has systematically discriminated against kids in low-income, Black and brown communities for decades.

How can anyone look the kids and parents of this commonwealth in the eye and say, “I oppose fully and fairly funding your education?”

The only answer the opponents have given is that “we can’t afford it.”

Yet there is $14 billion in the state’s bank accounts that would cover at least the first four years of the program, while leaving billions in the rainy day fund.

To that, the opponents say we can’t use that money for recurring expenses.

Yet yesterday they voted for a proposal that would create a 2.7 billion reduction in recurring revenues and soon use up the entire surplus.

So now there is no debate about whether we have the money to fund the seven year plan fully and fairly fund our schools.

We do. Everyone, Democrat and Republican, now agree. We have the money.

The only question is whether we want to spend the money we already have on meeting our constitutional and moral obligation to fund our schools. Or whether we want to give more tax cuts to the richest Pennsylvanians.

To those who say we need tax cuts to secure economic growth, let me just point out we have reduced corporate taxes by $5 billion per year over the last 30 years–revenues that could pay for almost the entire 7 year plan. Yet those tax cuts have left us with the slow growth and declining population about which Republicans complain.

What will create economic and population growth is investing in our kids, the future workers of Pennsylvania. Educate our kids, give them the tools to succeed, and then you will see people and businesses flock to the state and our economy grow faster than ever.

This is the choice before us. We either fix our schools and give our kids and our economy a bright future. Or we continue down the path we have been on for 30 years and see our kids and our economy struggle in darkness.

Tell our legislators:

Choose light over darkness. Choose our kids.

May 8, 2024

Republicans Choose Tax Cuts for the Rich over Funding Education

By Blog Post, Press Statements

Yesterday, Senate Majority Leader Joe Pittman (R-41) introduced legislation to cut Pennsylvania’s personal income tax rate from the current 3.07% to 2.8%.

This legislation is both deeply cynical and totally revealing of the unfortunate priorities of Republicans in Harrisburg. For it shows us that, once again, they have chosen to cut taxes for the rich rather than fund education fully and fairly.

Ever since a majority of the Basic Education Funding Commission (BEFC), with the support of Governor Shapiro, embraced a seven-year plan to meet the constitutional obligation to fund our schools, the Republicans have had only one response: “We can’t afford it.” They did not appeal the Commonwealth Court decision, which declares that the current system of funding schools is unconstitutional. They did not propose an alternative to the BEFC plan. They just said, “We can’t afford it,” even though the state has more than a $14 billion surplus.

But while they say we can’t afford to fund our schools, it appears they believe we can afford to cut the state’s personal income tax (PIT) by almost $450 million per year by fiscal year 2028. And because the PIT is a flat tax, most of the benefit of the tax cut would flow to the richest Pennsylvanians. Our analysis shows that Pittman’s bill would, on average, reduce taxes for the top 1% of taxpayers, with an average income of $1.9 million, by $5,435 per year. It would reduce taxes for the middle 20% of families, with an average income of $67,100, by $181. And because of the tax forgiveness program, it would most likely not reduce taxes for people in the bottom 20% by more than $20 per year.

This is not the first time Republicans have chosen cutting taxes for the wealthy over funding education. Just two years ago, they forced Governor Wolf to accept a 60% reduction in the Corporate Net Income Tax (CNIT) to secure a small increase in school funding. That nearly $2 billion-per-year reduction in corporate tax revenues was in addition to the more than $4-billion-per-year reduction in corporate taxes over the last 20 years as a result of phasing out the Capital Stock and Transfer Tax and reducing the CNIT base under Governor Corbett.

These corporate tax cuts, along with our flat tax and overreliance on sales and property taxes, is why Pennsylvania has the fourth most regressive tax system of any state, in which the top 1% pay less than half the share of state and local taxes as families in the middle or bottom of the income distribution.

Moreover, if we compare the decline in share of tax revenues that comes from corporate taxes to the decline in the state share of funding for schools—the primary source of the deep and persistent inequity in school funding—you can see that these data series track one another almost perfectly.

The Republican insistence—sometimes with Democratic connivance—on cutting corporate and other taxes is the prime cause of the current education funding crisis.

Pittman’s bill is just one more instance of these same distorted priorities. And, they are especially problematic because there is no evidence that tax cuts for the rich have in the past, or would in the future, spur our economy or create more jobs at any reasonable cost. There is also a great deal of evidence that fairly funding our schools would lead to greater educational achievement for Pennsylvanians and both economic growth and job creation.

If the General Assembly wants to cut taxes now, there is a far better way to do so than a reduction in our flat tax. The state could adopt a variant of the Fair Share Tax plan the Pennsylvania Policy Center has been putting forward over the last five years. That plan would cut the tax rate on two classes of income wages and interest while raising the tax rate on what we call income from wealth: dividends, capital gains, business profits, royalties, estates, and gambling winnings. Since most income from wealth is earned by those at the top of the income distribution, 54% of any increase in revenues would come from the top 1% and another 24% from the next 4%. More than 60% of families would get a tax cut, and another 22% would see no change in their taxes. Only about 17% of families would pay more.

If the members of the General Assembly just want to provide some tax relief for working people, they could cut the tax rate on income from work to 2.5% and increase the tax rate on income from wealth to about 4.25%, leaving overall revenues unchanged.

Or, if our representatives and senators want to begin to repair our tax system while raising more revenue for education they could set the tax rate on income from wealth at 6.5%, which would raise about $2 billion in new revenues for the state.

Either of these proposals would be a reasonable way to improve our tax system without reducing revenues we need to fully and fairly fund education or increase those revenues by adopting the second plan.

These are the proposals that state legislators would be putting forward if they were ready to fix the immoral and unconstitutional education funding system in Pennsylvania.

May 7, 2024

Join Us for Our Online Tax Justice Conversation!

By Blog Post

Dear Friends –

At Pennsylvania Policy Center we are continuing our call to reverse our upside-down tax system, and demand corporations and the ultra-wealthy to pay their fair share!

Please join the PA Megaphone team and our Pennsylvanians Together campaign for another conversation about tax justice leading up to Tax Day!

Pennsylvanians work hard, day in and day out, to take care of their families—but many of us are struggling to make ends meet while wealthy corporations and the 1% get richer and richer.

Join us at 12:30 PM on Friday, April 12 for a special Tax Day organizing event.

We’ll hear from some special guest speakers, including a Patriotic Millionaire and an SEIU home care worker to discuss why we must make our tax system more fair for working families. Then, PA Megaphone and Pennsylvanians United will share ways we can join together to advocate for tax justice online and offline.

This virtual event will take place as a Zoom webinar at 12:30 p.m. on Friday, April 12.
More details to be announced shortly! RSVP now to stay in the loop.
 

What is tax justice?

Tax justice means that ultra-rich individuals and wealthy corporations pay what they owe.

It means that their share of taxes enables us to provide the common goods we all need to create a growing, high-wage economy and a strong future for all of us.

And it means rejecting even more tax cuts for large corporations and the wealthy—tax cuts that create few jobs but undermine public education, the building and improvement of roads and bridges, and other public goods that create jobs.

Learn more about Pennsylvanians Together’s Tax Justice campaign here.

  • Dwayne Heisler, Campaign Director, Pennsylvanians Together

The Pennsylvania Policy Center aims, through its research and policy development, to create the tools that political officials, opinion leaders, grassroots organizations, and the people of PA need to expand our vibrant democracy, secure our freedom, and seek economic justice in Pennsylvania.

April 10, 2024