How Do PA Taxes Compare to New Jersey and West Virginia?

On Wednesday, I blogged about a new report out from the Institute on Taxation and Economic Policy showing Pennsylvania is among the "Terrible 10" most regressive tax states in the nation. This means state and local taxes fall disproportionately on middle-class, working and poor families to the advantage of the richest taxpayers.

To quickly recap: Middle-income families in Pennsylvania pay more than double the share of their income in taxes than the very wealthiest Pennsylvanians, while low-income families pay nearly three times as much.

As you can see in the chart below, low- and middle-income families in Pennsylvania pay a higher share of their incomes in state and local taxes than they do in neighboring New Jersey and West Virginia, while wealthy earners in Pennsylvania pay much less.

Pennsylvania’s flat income tax contributes to its regressive tax ranking, and that's why the commonwealth should amend the state Constitution to enact a graduated personal income tax.

The commonwealth could increase the effective tax rate on the wealthiest with little impact. Pennsylvania’s personal income tax has the lowest top rate among the 41 states and the District of Columbia that have income taxes on earnings. The top 1% of Pennsylvania earners, meanwhile, saw their average income grow in 2010 by more than $100,000 to $1,009,688. They captured 76 percent of all growth in personal income that year.

 

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