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Lawmakers’ Plan Offers Middle Class Tax Cut, Ensures Wealthiest Pay ‘Fair Share’

HARRISBURG, March 22, 2017 — State Sens. Art Haywood and Vincent Hughes, along with the Pennsylvania Budget and Policy Center, today announced a plan to generate additional revenue to address the commonwealth’s deficit by ensuring that the wealthiest Pennsylvanians pay their fair share in taxes, while reducing or leaving untouched the tax burden on 84 percent of all taxpayers.

The “Fair Share Tax” plan would divide the state’s Personal Income Tax into two parts: a tax on wages and interest, which would be reduced from 3.07 percent to 2.8 percent; and a tax on income from wealth, which would increase from 3.07 percent to 6.5 percent.

Income from wealth would include dividends or net income from a business, profession, or farm; capital gains; net income from rents, royalties, patents and copyrights; gambling and lottery winnings and income from estates or trusts.

Under the plan, 58 percent of taxpayers will see their taxes go down and another 26 percent will see no change in their taxes. It is expected to bring in $2 billion in new revenue to balance the commonwealth’s budget.

Hughes and Haywood said they will sponsor the legislation that would implement the Fair Share Tax plan.

 

“Under our state’s current tax structure, the Personal Income Tax is the same, whether you are wealthy, middle class or struggling, which means average Pennsylvanians bear the tax burden. It’s time for those at the top to pay their fair share,” said state Sen. Vincent Hughes (D-Philadelphia/Montgomery), Democratic chairman of the Senate Appropriations Committee. “This plan would ensure more fairness in our Personal Income Tax structure, provide a break for many taxpayers and bring in much-needed new revenue to Pennsylvania.”

“Our taxes are rigged against everyday people. Moderate and low income Pennsylvanians pay more of their income in taxes than the high income,” said state Sen. Art Haywood (D-Philadelphia/Montgomery). “The Fair Tax proposal is a solution to having the deck stacked against us.  The Fair Share Tax plan also provides money for schools, state troopers and new jobs in distressed cities and towns.”

Pennsylvania’s Uniformity Clause prohibits graduated tax rates, resulting in a flat-rate income tax. This is inherently regressive because a flat rate means state and local taxes take a higher proportion of income from lower-income families than high-income families. Currently, the 20 percent of taxpayers with the lowest incomes pay 12 percent of their income in state and local taxes, while the top 1 percent of taxpayers pay only 4.2 percent of their income in state and local taxes, according to the Pennsylvania Budget and Policy Center.

“We will never have the resources we need to invest in education, infrastructure, human services and the protection of clean air and water if we don’t fix our upside-down tax system so that everyone pays their fair share,” said Marc Stier, director of the Pennsylvania Budget and Policy Center. “The legislation being announced today is a huge step in that direction.”

“Too many kids in our cities are all breathing dirty air and too many kids in our rural areas don’t have access to safe drinking water but, year after year, Pennsylvania has slashed the budgets for clean air and water and laid off a whole generation of environmental protectors,” said Josh McNeil, executive director of the Conservation Voters of Pennsylvania. “If our wealthiest citizens can put us back on track to a healthy environment, every citizen will benefit.”

“Pennsylvania needs to have a budget that is fair and equitable for all of its citizens, especially the most vulnerable among us and those that are struggling,” said Rochelle Jackson, public policy advocate at Just Harvest. “We need a revenue and tax system that does not overburden low and middle income households and requires the wealthy to pay their fair share.”

According to Gov. Tom Wolf’s annual state budget address, Pennsylvania currently faces a $3 billion structural deficit. As budget negotiations continue, the lawmakers said this new revenue would provide a stable source of funding without burdening average Pennsylvania families.

Editor’s Note: A copy of the Pennsylvania Budget and Policy Center’s report is available online: https://pennbpc.org/fair-share-tax-support-public-investment-pennsylvania

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Media Contacts
Elizabeth Rementer (Sen. Hughes): 717-787-5166, erementer@pasenate.com
Michelle Welk (Sen. Haywood): 215-242-8171, mwelk@pasenate.com
John Neurohr (PA Budget and Policy Center): 724-903-0077, neurohr@pennbpc.org

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