Socialist members of the Pennsylvania state House of Representatives on Friday proposed a tax increase on net profits, dividends, rental income, copyrights and patents as well as gambling and lottery winnings.
Currently, Pennsylvania’s income-tax rate is 3.07 percent. The plan would raise it to 6.5 percent on the aforementioned items.
The legislation’s principal sponsors include Representatives Elizabeth Fiedler (D-Philadelphia), Sara Innamorato (D-Pittsburgh), Rick Krajewski (D-Philadelphia) and Summer Lee (D-Braddock), all members of the Democratic Socialists of America. Rep. Christopher Rabb (D-Philadelphia) is also a sponsor, having last session introduced a version of the measure he calls the “Fair Share Tax Plan.”
The bill would lower the income-tax rate to 2.8 percent on wages and interest, but it would be far from revenue neutral; sponsors expect it to net the state $2.8 billion annually.
Rabb and his cosponsors say they are offering the legislation because the Pennsylvania state income tax is too regressive, citing data from the D.C.-based Institute on Taxation and Economic Policy (ITEP), a Leftist think tank. According to ITEP, the least-wealthy 20 percent of working-age Pennsylvanians pay about 14 percent of their income on state and local taxes, middle-income Pennsylvanians pay over 10 percent, and the most affluent pay about 6 percent of their income.
“This solution will both reduce the overall budget deficit as well as provide more relief for the majority of Pennsylvanians,” the bill’s authors wrote in a memorandum urging colleagues to cosponsor their bill. “As a result, 85 percent of Pennsylvanians would see either a decrease or no change in their taxes.”
No vote was taken on Rabb’s measure last session; it stands scant chance of passage this time around, and not only because Republicans control both chambers of Pennsylvania’s General Assembly. The rationale sponsors have put forth regarding the bill contradicts the current rhetoric of the Keystone State’s Democratic leaders by observing a “budget deficit” and suggesting tax increases are needed to correct such a shortfall.
In his budget address last week, Governor Tom Wolf (D) boasted of a “$2-3 billion budget surplus” and declared, “We can do so much more for our people and we can do it without raising taxes one penny.”
One reason calls to make taxes in Pennsylvania and other states less regressive has been the countervailing force of transfer payments (i.e., welfare and other forms of government assistance) funded by tax revenues.
“Because a regressive tax system in isolation increases income inequality, making the tax system bigger would appear to cause an even larger increase in inequality,” researchers Cody F. Kallen, Sita N. Slavov and Alan D. Viard wrote in a 2017 report for the pro-free-market American Enterprise Institute. “However, the transfer payments financed by the tax system are surely progressive and therefore reduce inequality.”
– – –
Bradley Vasoli is managing editor of The Pennsylvania Daily Star. Follow Brad on Twitter at @BVasoli. Email tips to [email protected].
Photo “Rick Krajewski” by Rep. Rick Krajewski. Photo “Elizabeth Fiedler” by Rep. Elizabeth Fiedler. Photo “Sara Innamorato” by Rep. Sara Innamorato. Photo “Summer Lee” by Rep. Summer Lee. Photo “Chris Rabb” by Rep. Chris Rabb. Background Photo “Pennsylvania State Capitol” by DEZALB.
