Recently in a letter to the editor, I was criticized for withholding support of Senate Bill 76 and House Bill 76, state legislation that proposes to eliminate some real estate property taxes for Pennsylvania property owners. Neither of these bills involve a tax reduction. Instead, by eliminating school real estate taxes, but not all real estate taxes, these bills propose to shift taxes away from real estate. The question then becomes, “Who pays for this shift?” According to the letter writer, this shift involves increasing the state’s personal income tax by 1.6% and by increasing the sales tax by 1%, which are implied to be “minimal” increases. That comment falls within the realm of being a misleading half-truth.
SB 76 and HB 76 propose to increase the personal income tax from 3.07% to 4.95% which is a 1.88% increase. (The letter writer refers to a 1.6% increase but there is no proposal with such an increase.) The fact not addressed is what is the percentage of increase from the base number? An increase of the personal income tax from a rate of 3.07% to a rate of 4.95% is a 61% increase. Some simple examples: Assume a $10,000 taxable income. At 3.07% the personal income tax would be $307, but at a rate of 4.95%, the tax would be $495. Or assume that last year you had a personal income tax bill of $1,000. By increasing the rate as the author advocates under SB 76 or HB 76, the tax bill would increase from $1,000 to $1610. That is a 61% increase and a substantial increase, in my opinion, for any tax.
The same analysis is true for the sales tax increase, which the author implies is a minimal 1%. Currently, the state sales tax rate is 6%. A 1% increase will increase the tax to 7% which represents a 16% increase over the current rate. A change in the base rate from 6% to 7% is a 16% increase. In addition, and perhaps the most onerous, the proposal regarding the sales tax increase will substantially expand the items subject to tax to include such items as some food, clothing over $50, professional services, over the counter medication, daycare and nursing home care. The net result is a higher tax rate and a great expansion of the items subject to taxation.
Again, “who pays for this tax shift?” Without question the burden of this tax shift will fall on middle class working families. Workers will pay a 61% increase in personal income taxes while landowners, including such operations as Target, Walmart, US Steel, Wegman’s and Sheetz pay no school taxes. And, as stated, the working families will be the hardest hit by the sales tax expansion. Those are the people who buy food, clothing, medicine and day care services.
The author of the letter to the editor suggested that individuals contact my office regarding SB 76 and HB 76 based on the misleading information, which the author presented. I will issue a similar invitation. I would like to hear from anyone who supports a 61% increase in the states personal income tax and a 16% increase in the sales tax. If people want such increases in order to have some school real estate taxes eliminated, I will certainly support their decision.