A new WalletHub study finds Pennsylvanians pay the fifth highest tax burden out of the 50 states and the District of Columbia. The numbers are based on state and local taxes alone, not federal income taxes.
Pennsylvania levies a 3.07 percent state income tax, a 7.99 percent corporate income tax, and a 6 percent sales tax rate.
Some municipalities impose income taxes, as well as real estate taxes. Counties and school districts also demand real estate taxes.
WalletHub analysts found Pennsylvania was 47th from the bottom for its effective state and local tax rate, 50th for income taxes, 40th for real estate taxes, and 21st for sales and excise taxes.
“Every year during tax season, Americans are reminded of how much of their hard-earned income isn’t theirs to keep. Living in the right state can ease the stress of tax time, though, as taxpayers in the least expensive states pay less than half as much as those in the most expensive states,” said Chip Lupo, WalletHub writer and analyst.
High state and local taxes fall particularly hard on small business owners like the members of the National Federation of Independent Business (NFIB). Greg Moreland, director of the Pennsylvania NFIB told DVJournal, “The tax system here in the commonwealth is broken. There are too many carve-outs for certain industries.
“If you have a high-powered lobbyist, you can get a tax credit for your industry and save money. But all that does is push the pressure onto the sectors that don’t receive those tax credits. Because at the end of the day, the government needs their money,” Moreland said.
The only states ranked with a higher effective tax rate than Pennsylvania are New Jersey, Connecticut, New York, and Illinois, which has the highest tax burden in the U.S.
The lowest tax states are Alaska, Delaware, Wyoming, Idaho, and Montana.
Pennsylvania was also among the highest (49th) for taxes on gasoline compared to other states, with Alaska again coming in at the lowest. Pennsylvania drivers pay $0.576 per gallon.
DVJournal readers offered their own theories via social media about why the state’s taxes are so high.
“Government pork,” said Greg Williams.
Some Pennsylvanians are fleeing to low-tax states.
“Pennsylvania is losing residents to other, more fiscally responsible states,” said Kevin Kane, director of legislative strategy for the Commonwealth Foundation, Pennsylvania’s free-market think tank. “Recent data revealed that for the 14th time in 15 years, Pennsylvania saw population loss from domestic migration.
“In our latest polling, we found that nearly 4 in 10 younger Pennsylvanians (under the age of 44) have thought about leaving the state or know others who have considered it or already left. The top three reasons cited should come as no surprise: lower cost of living, lower taxes, and better jobs and opportunities,” Kane said.
“The commonwealth is facing an out-migration crisis because it lacks a competitive edge compared to other states. Pennsylvania’s tax and spend policies, worsening structural deficit, and record-high spending are driving businesses and people out of our state,” he added. “Unfortunately, things are not looking up.”
Taking a jab at the Democratic governor, Kane said, “While the current administration claims to be ‘competitive as hell,’ the policies do not match what other more competitive states are offering. Gov. Shapiro’s latest budget address is a prime example of this – to pay for this year’s executive budget, the state would have to approve an estimated $1,900 tax hike for a family of four.”
In an acknowledgement that the state’s tax burden is hurting business and slowing growth, Shapiro’s budget includes calls for significant tax cuts.
“My budget would cut taxes for businesses by $10.5 billion by 2029 — in addition to the $450 million in tax cuts we delivered for families and seniors over the past two years,” Shapiro said after he unveiled his plan. “If we really want to spur economic growth and help businesses grow here, we need to make our tax system more competitive.”
Asked about the latest ranking, Shapiro’s spokesperson Manuel Bonder said the governor “has cut taxes several times and continues to focus on cutting taxes for Pennsylvanians. He has put that front and center in his budget proposal and will continue pushing to make our commonwealth more competitive.”
Critics say Shapiro’s plan is unrealistic, relying on revenue from legalizing marijuana and a 52 percent tax on unregulated skill games, both of which are unlikely to happen.
According to Kane, gimmicks won’t fix Pennsylvania’s high-tax problem.
“Unless lawmakers prioritize a balanced budget, slash taxes and regulations, and promote common-sense policies to make our state more attractive to businesses and families, Pennsylvania will continue to lose its greatest commodity – its people.”
