Pennsylvania’s unequal tax system called into question on Tax Day

Pennsylvania faces a $6.7 billion budget deficit, and lawmakers are looking for alternate ways to raise sustainable revenue.

Lawmakers and advocates gathered in the Pennsylvania Capitol on Wednesday – Tax Day – to highlight the commonwealth’s generous tax structure for the ultra-wealthy and how that may impact the state’s budget.

“ Pennsylvania’s 23 billionaires have grown their collective wealth by $32.6 billion – 24.3% – since Trump was reelected,” said Felicity Williams, executive director of the Pennsylvania Policy Center.

“That is not just wealth growth. That is a system that is extracting more from people who work for a living while allowing extraordinary wealth at the top to grow largely untouched, and it brings us to the choices in front of us right now in Pennsylvania.”

Democrats in the Pennsylvania House passed a bipartisan $53.3 billion budget proposal that’ll serve as a framework for the final budget due by the end of June. 

However, a recent report from the progressive-leaning Pennsylvania Policy Center highlights House Bill 2400’s issues, as it relies largely on one-time revenue resources and uncertain revenue proposals, such as cannabis legalization, to cover the state’s $6.7 billion budget deficit.

According to the report, the upcoming budget transfers $4.57 billion from the Rainy Day Fund and $100 million from the Federal Response Fund to reduce the deficit by $4.67 billion. It also relies on the General Assembly to pass legislation such as raising the minimum wage or legalizing cannabis, and regulating skilled games to generate $1.76 billion in revenues. 

Taxing billionaires and closing corporate friendly loopholes are some alternatives lawmakers are considering.

“ We are in an age of dramatically increasing wealth inequality, and it is overwhelmingly driven at the top by multimillionaires and billionaires, who are accumulating wealth rapidly, distorting our political system with massive amounts of spending through super PACs,” State Sen. Nikil Saval (D-Philadelphia) said in an interview. 

He added, “they are tilting policy and politics in their direction away from working class people who increasingly are struggling to survive, they’re struggling to put food on the table, they’re struggling to pay for housing, they’re struggling to afford transit and we shouldn’t be choosing policies that support billionaires over working class people.”

Progressive lawmakers in the Pennsylvania House and Senate have growing support for a packet of bills that skirts the uniformity clause in the state constitution and taxes the commonwealth’s ultra-wealthy. 

These proposals include placing a tax on social media advertisements, a tax on passive income on stocks and real estate, and closing the Delaware Loophole, which allows corporations to file their paperwork in Delaware to skirt paying corporate taxes in Pennsylvania. Pennsylvania Policy Center estimates the state could save roughly $328.4 million by closing the loophole.

“ Currently, low and middle income working people in our state devote a big chunk of their income to state and local taxes. That part is no surprise to most people. It’s about 12%,” said State Rep. Elizabeth Fiedler (D-Philadelphia).

“Meanwhile, the super rich who make more than $700,000 a year spend only a small fraction of their income, about 6%, on state and local taxes.”