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ITEP Report: Tax Fairness in Pennsylvania

Every few years, the Institute on Taxation and Economic Policy releases its survey of taxes in the states, “Who Pays?” Click here to read the seventh edition, released on January 9, 2024. 

See a summary of the data for Pennsylvania just below and ITEP’s charts in a PDF at the bottom of this page.

This year’s report continues to tell the same story that we have seen for decades. Taxes in Pennsylvania are among the most upside-down in the entire country.

The report shows that

  • the lowest-income 20% of taxpayers face a state and local tax rate that is 152% higher than the top 1% of households. The average effective state and local tax rate is 15.1% or the lowest-income 20% of individuals and families, 11.4% for the middle 20%, and 6% for the top 1%.
  • Pennsylvania has the highest tax rate on low-income families in the entire country at 15.1%.
  • Pennsylvania has the 4th-most regressive tax system in the nation.
  • Pennsylvania is one of 42 states that tax the top 1% less than every other income group, and it’s one of 35 states that taxes its poorest residents at a higher rate than any other group.

A tax system that places a much higher burden on those with low incomes than those with high incomes undermines the common good in three ways.

First, it is unfair. The tax burden is far greater when people’s incomes are lower. People with low and moderate incomes use all their income to pay for necessities. People with high incomes use far more of their income for luxuries or for savings.

Second, people and corporations with high incomes typically are able to earn those incomes in part because of government spending on education; research and development; transportation; and other infrastructure. Higher tax rates are a way for them to “give back” to the community for the benefits they receive.
 
And, third, progressive taxation is necessary for equality of opportunity—that is to allow those with low and moderate incomes to make the best use of their talents and abilities, not just for themselves but for the community as a whole.

It’s time for the state of Pennsylvania to adopt common sense solutions to repair our unfair tax system, including the fair share tax system, which would replace our flat income tax; corporate tax reform; and a severance tax on natural gas drilling. We will be updating these three proposals in the next few months.

VIEW IN A PDF READER, PRINT, OR DOWNLOAD.

 

itep-whopays7-PennsylvaniaDownload

 

 

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