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PBPC Research Prompts Senators to Introduce Tax Fairness Legislation

May 11, 2016 - 4:15pm

Something new and unusual happened in Harrisburg today. Senators Art Haywood, Vincent Hughes and Jay Costa put forward an idea that actually could help resolve the pressing fiscal cliff we face this year, and at the same time could make our tax system more progressive.

Despite partisan differences, three goals are more or less shared by everyone in Harrisburg. While their top priority may differ, for the most part, legislators all say they want:

1. to close the $1.8 billion structural deficit;

2. to spend more on education;

3. and to put no additional tax burden on low- and middle-income taxpayers.

Yet no one has presented a plan to accomplish this feat. In an election year, legislators will say that they are not willing to raise the income tax or sales tax – which could generate the necessary funds to close the deficit and fund education – because doing so would harm working people and the middle class. Under the uniformity clause of the PA Constitution, it is illegitimate to tax the same class of income at different rates, so we can’t just raise taxes on those with high incomes. And the tax proposals that legislators might accept – new tobacco taxes or a severance tax on natural gas drilling – by themselves do not get close to generating the revenues necessary close the deficit.

But now we have a real alternative. Senator Haywood’s legislation, which is based on a proposal PBPC put forward three weeks ago, calls for certain classes of income we call income from wealth – dividends; 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 – to be taxed at a 4% rate. Income from regular wages and interest will still be taxed at the current 3.07% rate.

This proposal raises $758 million a year. And as the chart below shows, it barely raises taxes for the bottom 60% of households, those making $65,000 or less, who would pay between $2 and $28 dollars a year. It raises taxes by only $55 a year for the fourth quintile of households, making between $65,000 and $101,000. Even the next 15% of households, with an income of $101,000 to 201,000 only pay $118 a year. It is only when one gets to the top 5% of households that the tax really kicks in.  The top 1% – income of $463,000 or more – pays $5,304 on average. And they can afford it.

(click the graph to enlarge)

In other words, it turns out that you can raise taxes just on those with high incomes in Pennsylvania despite the uniformity clause, as nothing in the Constitution prohibits different classes of income from being taxed at different rates.

And while $758 million doesn’t close the structural deficit, it gets us much closer to doing so, and makes it conceivable that a number of other small taxes that don’t hit low- and middle-income Pennsylvanians could get us the rest of the way there.

Sometimes a little creativity is needed to find the way out of a sticky political situation. Senator Haywood’s proposal has shown us a path toward resolving the current budget crisis; just in the nick of time.


Advocacy Update: Hunger Transcends Political Boundaries

May 11, 2016 - 2:33pm

Last month, the state’s 2015-16 budget impasse finally came to an end --- more than nine months after it started. But there was little time to celebrate. As quickly as one budget debate ended, a new one began.

Legislators and the governor now must begin in earnest to craft and finalize a 2016-17 budget. They have two months to do it. The state’s fiscal year runs from July 1 to June 30 each year, and May and June are the most critical months for finding consensus.

Despite the differences between the Democratic governor and Republican legislature last year, they were able to find a few shared priorities. Among them was a decision to set aside $1 million to fund the Pennsylvania Agricultural Surplus System (PASS).

With PASS, the state’s charitable food organizations will work with Pennsylvania’s agriculture sector and farm communities to feed those in need. Millions of pounds of Pennsylvania-grown fruits and vegetables that otherwise would go to waste each year instead will support nutritious family meals.

PASS was created by Act 113 of 2010. The program had never been funded beyond the pilot phase, until now.

Let’s hope the modest accomplishments with PASS last year are a sign of progress for this fiscal year.

Because as important as PASS is, the State Food Purchase Program (SFPP) remains the critical lifeline for food banks. SFPP provides cash grants for the purchase and distribution of food to low-income individuals.

Unfortunately, for years, the SFPP has been chronically underfunded. In 2006-07, the state allotted $18.75 million for SFPP. Since then, funding has dropped 7.5 percent to $17.4 million.  The current budget plan kept funding flat --- even though the number of residents eligible for SFPP has increased by 23 percent over that same period.

SFPP is needed now more than ever.

Food insecurity among Pennsylvanians has increased from 10 percent of our population to 14.2 percent.

An estimated 2 million people in Pennsylvania --- one in seven --- turn to food pantries and meal service programs to feed themselves.

Food costs have increased 24 percent over the last decade and continue to rise. Grocery store prices are expected to go up by as much as 2.5 percent in 2016, according to the U.S. Department of Agriculture. That’s on top of the 1.2 percent increase in 2015. Families and food banks alike are feeling the pinch of these higher costs.

The governor’s current budget would increase the SFPP line item by $2 million. $1 million of that increase will go to PASS. It’s a start, but it’s not enough.

There is enormous pressure on food assistance providers.

As legislators get busy in May and June to craft the 2016-17 budget, they need to remember that hunger is an issue that transcends political boundaries. There isn’t a single community in Pennsylvania that isn’t affected.

And if we want to truly help all those in need, then the final spending plan should include $21 million for SFPP and $5 million for PASS.

This is a guest post from Sheila Christopher, Executive Director of Hunger-Free PA. It was originally posted at their blog here.