Wednesday, August 10, 2011

More DC input on PA's tax burden

Grover Norquist was revealed months ago as the puppet master pulling the strings behind the policy decisions of Republican state lawmakers in Pennsylvania. Lawmakers across the country, including 34 right here in Pennsylvania (plus one enthusiastic Governor) took an oath to represent the interests of a Washington, DC lobbyist rather than the people who elected them.

Well it turns out there is more than one voice coming out of Washington on Pennsylvania's tax policy. In a report by the Tax Foundation, a self-proclaimed "nonpartisan tax research group based in Washington, D.C.," (judge for yourself), Pennsylvania was found to have the 10th highest tax burden among the 50 states at 10.1% of a resident's income paid to the state. Who tops the list: New Jersey (home of Gov. Chris Christie, the darling of Tea Party enthusiasts).

The report makes some interesting and useful statements regarding the balance states choose when generating tax revenue from out-of-state sources, versus in-state sources. Like other states with a high resident tax burden, Pennsylvania tax policy allows for "non-residents" like out-of-state industries, natural gas drillers etc to get away without paying much.

As a result the percentage of the total taxes paid in PA, 23.7% are paid by non-resident sources, while residents like you and me get walloped with covering the remaining 76.3%.

The Foundation's definition for "total tax burden" on an individual includes both state and local taxes, so it's worth noting while Corbett and others quibble over detail in regards to what is a tax versus a fee and whether Grover approves of the state budget, according to the Tax Foundation Corbett's "no tax pledge" gets lumped in with the countless local property tax hikes his budget is responsible for.

Further, many people like Gov. Corbett would claim the Commonwealth has an unfair tax environment for business, but in the far more conservative corner of the country, Alaska, residents cover a mere 20.5% of taxes; non-residents: 79.5%. The report even notes that in Alaska, "State residents get the equivalent of subsidy from some of the world's largest oil companies."

The report points to several solutions to lighten the load on residents. Spoiler alert: one of them is impose a tax on the natural gas industry. But in reality, several solutions exist that would favor the Pennsylvania resident as opposed to out-of-state retailers, manufacturers, and users of Pennsylvania goods and services.
Here are a few that I've been repeating for a very long time:

·     True, PA has the highest corporate tax rate, but we don't require combined reporting. So any company with a semi-competent tax attorney knows if they HQ their company in say Delaware, then they escape paying taxes in the Commonwealth. Seventy percent of all  "C" corporations operating in PA pay NO taxes, and 84% pay less than a family of 4 earning $30K p/yr. If Pennsylvania closed this loophole, we could lower the burden on our state's homegrown small businesses...increasing the burden on "foreigners" and lessening the burden on people in our own community.

·     Along those lines, what's crazier than not taxing big box retailers like Walmart, Best Buy and Home Depot? Paying them to do business here! These vendors get to keep 1% of the sales tax they collect, just because they pay the state's share of sales tax that they collect on time. This costs the Commonwealth $70 million p/year.  A blanket exception for a reasonable portion of this would insure that small, in-state retailers could keep this incentive while reaping tens of millions of dollars from the big guys.

·     Pennsylvania remains the only state that does not tax cigars or smokeless tobacco. We also don't tax funeral services, dry cleaning, manufacturing equipment or gold bullion. While all of these goods and services may have legitimate claims as to why they were exempted from taxes in the first place, they all merit review.

All of this is to say, Pennsylvania's tax system could use a complete overhaul which would bring it into the 21st century. Unfortunately the current regime can't utter the word "tax" unless they ask Grover Norquist first and it's preceded by the word "No", so the chances of PA improving on the Tax Foundation's list of tax offenders anytime soon is slim to none...but that won't keep me from talking about the insanity of the Republican agenda as it is currently being foisted on the citizens of this great state.