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1 Jared Walczak, Income and Sales Tax Increases in Context 1 (2015)

handle is hein.taxfoundation/insaltxic0001 and id is 1 raw text is: Income and Sales Tax Increases in Context Jared Walczak Policy Analyst, Tax Foundation Pennsylvania Senate Finance Committee June 10, 2015 Introduction Chairman Eichelberger and members of the Committee, thank you for the opportunity to testify before you today on proposals to increase the personal income tax and the sales and use tax. I'd like to start with a very brief overview of the state's broader tax structure, then return to those two proposed tax increases, contrasted with tax reductions they are intended to fund, bearing in mind that even after that tax shifting, the plan is projected to increase overall revenue by $4.7 billion. Overview of Pennsylvania's Tax Structure Pennsylvania's tax climate is at best uneven, combining a relatively modest individual income tax burden and middle-of-the-road sales tax with high corporate and property tax burdens. Pennsylvania's tax competitiveness, however, is as much a matter of structure as it is of rates. At 9.99 percent, Pennsylvania's Corporate Net Income Tax (CNIT) is the second-highest state corporate income tax in the nation, and it's a significant factor in the Commonwealth's 46th place ranking on the corporate tax component of our 2015 State Business Tax Climate Index, which looks at rates and structure. Moreover, businesses are also hit with an antiquated capital stock and franchise tax which has been phasing out, in fits and starts, for years. With property taxes, the story is far more complex. Property tax collections are right at the median point, but the distribution is skewed by an inheritance tax and the aforementioned capital stock tax. Millages are of course assessed by counties, municipalities, and school boards, and in many counties, decades have passed between reassessments. Although I now work in D.C., I'm originally from Butler County, where the last reassessment took place in 1969. Forty-six years is a long time to go without a reassessment, and it introduces substantial inequities into the tax system. Millages may be adjusted from time to time to keep collections on target, but for many properties, the relative tax burden is determined by an assessment that is decades out of date. 1

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