Pennsylvania tax burden ranks 10th nationally
Pennsylvanians' state and local tax burden reached its lowest point in more than a decade in 2011, but it still climbed to rank as the nation's 10th most onerous, up two spots from the year before, an analysis released this week shows.
The Washington-based Tax Foundation said Pennsylvanians shelled out $4,374 per capita in state and local taxes in 2011, or 10.3 percent of their per-capita income of $42,268. About 10.5 percent of income went toward state and local taxes in 2010, the foundation said.
“This trend was largely driven by the growth of income,” said Tax Foundation economist Liz Malm, explaining the slight decline.
About 27 percent of Pennsylvanians' tax money went to other states. Aside from sales, excise, income, corporate and other taxes paid in other states, the Tax Foundation factors what it calls tax exporting.
Alaska has the second-lowest tax burden at 7 percent of income. It has no state income tax or state sales tax, but does have a severance tax on oil extraction that generates 77 percent of the state's tax revenue. Instead of factoring that as part of Alaska's tax burden, where the tax is levied, it allocates it to other states based on their oil and gas consumption.
“If you're an energy-producing state that gets a lot of money from extraction taxes, you do well on this report. If you're a cold-weather state and energy consumer, you do poorly,” said Sharon Ward, director of the liberal-leaning Pennsylvania Budget and Policy Center.
The top four natural gas-producing states — Texas, Louisiana, Wyoming and Oklahoma, respectively — rank among the bottom 11 states for tax burden. All of them impose severance taxes on drillers. Pennsylvania, the No. 5 natural gas producer, does not.
“I guess if you want to move up in this ranking, we should start levying severance taxes,” Ward said.
Pennsylvania surpassed national averages of $4,217 in taxes on $42,473 in income, or 9.9 percent of income, the study said.
Pennsylvanians' burden in 2011 was the state's lowest since 2002, when it was 10.1 percent of income.
“Lower taxes would spur better job and economic growth,” said Priya Abraham, senior policy analyst for the Harrisburg-based Commonwealth Foundation, a conservative policy group.
But Abraham describes Pennsylvania's chances of moving down in the rankings as “dismal,” noting pension costs are expected to go up by about $500 million a year for the next several years.
“We've calculated that the total state and local taxpayer bill from the state's two main pension systems … will balloon from a current $1.7 billion to $6.2 billion by 2016, which will amount to more than $1,000 in additional taxes per household,” Abraham said.
Elizabeth Brassell, a state Department of Revenue spokeswoman, said Gov. Tom Corbett has reduced Pennsylvanians' tax burden since taking office in 2011 by reducing spending, enacting property-tax reforms and eliminating the inheritance tax for family farmers and small-business owners. Corbett wants to phase out the capital stock and foreign franchise tax.
Tom Fontaine is a staff writer for Trib Total Media.