Report Maps Course for Closing Budget Gap
Thursday, December 22, 2016
HARRISBURG, Pa. -- Pennsylvania's budget deficit is on course to approach $3 billion by the end of June, but a new report suggests steps the state can take to close that gap.
According to the report, called "A Fair Share Tax Proposal for Pennsylvania," the problem is tax cuts - mostly benefitting the wealthy and corporations - rather than spending. But the state constitution prohibits a graduated income tax.
Marc Stier, director of the Pennsylvania Budget and Policy Center, the group behind the report, said the core of their proposal was to create a separate tax on assets such as dividends, capital gains, trusts and estates, that would primarily effect the wealthiest five percent.
"If we raise the tax on income from wealth to a slightly higher level than it's been on wages and interest,” Stier said, "we can generate a lot of money and most of that money will come from people in very high levels of income."
According to the report, raising the tax on wealth by .8 percent would generate $1.2 billion in revenue, with more than 80 percent coming from families with annual incomes of more than $101,000.
Stier said that other proposals include expanding sales taxes on goods and services used primarily by wealthy individuals, imposing a severance tax on natural gas drilling, and closing corporate tax loopholes.
"If corporate taxes brought in the same percentage of revenues that they did in 2003 we'd have another $2.4 billion this year and next year,” he said. "The combined $3 billion deficit wouldn't be an issue."
The report also said that raising the state minimum wage to at least $10.10 an hour would generate a $225 million net reduction to the deficit.
Stier pointed out that under the current system, the bottom 20 percent of earners in Pennsylvania pay 12 percent in state and local taxes, while the top one percent pays only four.
"As long as the system is as upside down as it is,” he said, "we'll never be able to raise the revenue we need to close the budget deficit and to fund education, human services and environmental protection at the level we want."
A similar tax plan was introduced in the General Assembly last year and is expected to be reintroduced in the coming legislative session.
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