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Senators Propose Solution to PA Budget Deficit

Pennsylvania has been named one of the “Terrible Ten” worst states for tax fairness. (Jason/Flickr)
Pennsylvania has been named one of the “Terrible Ten” worst states for tax fairness. (Jason/Flickr)
May 13, 2016

HARRISBURG, Pa. - A state senator says he's found a way to help balance the Commonwealth's budget and spend more on education without raising taxes on low and middle-income taxpayers.

Pennsylvania's constitution doesn't allow legislators to tax the same kinds of income at different rates.

But Marc Stier, director for the Pennsylvania Budget and Policy Center, says a bill proposal by Democratic Senator Art Haywood to raise taxes on certain kinds of income that mostly go to the wealthy would be allowed.

"We calculate that if we tax that second class of income at four percent rate, it would bring in about $788 million, which gets us about halfway to closing the structural deficit," says Stier.

That "second class" of income would include business income, dividends, capital gains, rents and several other kinds of income that most people don't receive.

The state currently is facing a structural deficit of $1.8 billion.

According to Stier, under Haywood's bill the 60 percent of households with incomes below $65,000 a year would pay between $2 and $28 a year more in taxes.

And those with incomes up to $200,000 would pay an extra $118 a year.

"On the other hand, the top one percent, people making $463,000 or more, would pay an additional $5,304 a year," says Stier. "And they're the ones who can afford it."

The Senate bill, S 1258, is based on a proposal the Budget and Policy Center brought forward last month.

When all state and local taxes, including sales tax, are taken into account, the lowest 20 percent of households in Pennsylvania currently pay about 12 percent of their income in taxes, while the top one percent pay only about four percent.

Stier says most states try to balance that by taxing high incomes at a higher rate.

"We can't do that in Pennsylvania," he says. "And that's why we're one of the 'Terrible Ten,' one of the 10 worst states in terms of tax fairness in the entire country."

Senator Haywood introduced the bill on Wednesday. What happens next is up to the leadership in both houses of the Legislature.

Andrea Sears, Public News Service - PA