Budget Fact s 2009
Today, the Commonwealth Foundation released three new Pennsylvania Budget Facts highlighting Gov. Rendell’s proposals to fill a $3.2 billion revenue shortfall in the state’s General Fund budget. The three new Budget Facts address Gov. Rendell’s proposed 16% increase in the state Personal Income Tax, his proposed Tax on Natural Gas extraction, and his proposed increase to the state Cigarette Tax.
Personal Income Tax
GOVERNOR RENDELL’S PROPOSED TAX HIKE
• Gov. Rendell has proposed a 16% increase in Pennsylvania’s personal income tax (PIT) rate-from 3.07% to 3.57%.
o This tax increase will take $1.5 billion in additional tax dollars from Pennsylvania residents and small businesses, the majority of which pay the personal income tax.
A TAX INCREASE WILL RESULT IN THE LOSS OF THOUSANDS OF PENNSYLVANIA JOBS
• Gov. Rendell’s proposed PIT increase to 3.57% would result in nearly 24,000 fewer Pennsylvania private sector jobs.
PENNSYLVANIA IS A HIGH-TAX STATE
• While Gov. Rendell and his allies contend that Pennsylvania has the 2nd lowest top or flat state income tax rate, this distorts the real tax burden shouldered by Pennsylvanians.
o Pennsylvania actually ranks 16th in the nation in income taxes collected per person, because the Commonwealth also has local income taxes, which few other states do.
• When looking at all taxes, Pennsylvania has the 11th highest state and local tax burden, according to the Tax Foundation.
Click here for the complete
"Budget Facts 2009: Personal Income Tax and Job Losses"
Natural Gas Severance Tax
GOVERNOR RENDELL’S PROPOSED TAX
• Governor Rendell has proposed a tax of 5% of on the value of natural gas extracted, plus $.047 per thousand cubic feet of extracted gas.
HOW MUCH WILL GOVERNOR RENDELL’S PROPOSED SEVERANCE TAX COST PENNSYLVANIANS?
• Pennsylvania’s average gas well earns profit averaging 15 percent of investment. Governor Rendell’s proposal will tax each well by one-third of its average cash flow.
• Through increasingly stringent environmental regulations and the desire for a more tax revenues, Governor Rendell has undermined Pennsylvania’s budding natural gas industry.
WHAT ARE THE ALTERNATIVES TO RENDELL’S PROPOSED TAX?
• A moratorium on any sort of severance tax, like Oklahoma and Texas implemented, will allow the natural gas industry to emerge, bringing jobs, revenue, and economic development to Pennsylvania.
• In the long-term, Pennsylvania can gain more revenue from lease payments and royalties through opening up additional state-owned lands to lease to natural gas drilling than from pushing out the industry through excessive taxation, before it has a chance to properly develop.
Click here for the complete
"Budget Facts 2009: Natural Gas Severance Tax"
Cigarette Taxes
BACKGROUND
• Governor Rendell has proposed raising the state cigarette tax an additional 10 cents per pack, in hopes of raising an additional $61 million in revenue.
• Pennsylvania’s state cigarette tax is currently the 18th highest among the 50 states at $1.35 per pack.
FEDERAL CIGARETTE TAX INCREASE WILL IMPACT PENNSYLVANIA’S REVENUE
• President Obama and Congress recently enacted the single largest cigarette tax hike in U.S. history, bringing the federal tax rate to $1.01 per pack.
o However, Pennsylvania will suffer a $140 million loss in state revenue as a result of the tax increase due mainly to an increase in unreported cigarette sales.
CIGARETTE TAXES HIT THE POOR HARDEST
• In a 2004, families with incomes in the bottom fifth of households paid 21.6% of total cigarette taxes collected (several times their share of income), while the highest quintile in household income paid 15% of tobacco taxes.
Click here for the complete
"Budget Facts 2009: Cigarette Taxes"
Additional Resources
• Tax Everyone But the Guy Behind the Tree
• The Path to Prosperity
• Taxing an Infant Industry to Death
• PolicyBlog: Taxes
More Budget Facts
• Pennsylvania State Budget Overview
• State Education Spending
• Spending by Department
For additional information on the State Budget and other issues, go to www.CommonwealthFoundation.org, or call 717.671.1901.
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The Commonwealth Foundation is an independent, non-profit public policy research and educational institute based in Harrisburg, PA.
www.CommonwealthFoundation.org
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