The Tax Foundation, which describes itself as a “non-partisan research think tank, based in Washington, D.C.”, has recently published its annual survey of state taxes, which allows the reader to compare taxes of the various states and the relative tax burdens that fall on the citizens of those states. It is an interesting publication both in terms of what it says about Pennsylvania’s taxes and what it shows about how all the states raise revenue.
The most obvious topic, especially given the April date of this publication, is Pennsylvania individual income taxes. All but seven states have an income tax. Of the remaining 43 states, the vast majority have a progressive, graduated tax on the amount of income. Pennsylvania is one of the few states that does not have a graduated income tax. Of the single rate states Pennsylvania has the lowest rate at 3.07%. This does not mean that Pennsylvania’s income tax is necessarily low. For example, several of the states that have graduated taxes start at a 1% rate or even lower. In any case, Pennsylvania collected on average $844 of income tax per person in 2013. Of the 43 states that collected an income tax in 2013 that put Pennsylvania in 30th place. To put that in perspective, Connecticut was in first place (highest per capita collection) of $2,174. Lowest of the 43 states with an income tax was Tennessee with $41 collected per person.
When all state and local taxes (for example, income tax, sales tax, real estate tax, etc.) are taken into consideration, Pennsylvania did not fare as well compared to the other states. The total tax burden per capita was $4,374. As a percentage of income (10.3%) , this was the 10th highest in the nation. New York was in first place with 12.6% of income going to state and local taxes. Wyoming was lowest at 6.9%.
Is there any category in which Pennsylvania was clearly in last place? Sadly, yes. If you live in Pennsylvania and you have access to public transportation you should probably take it. Or you should drive to New Jersey. Total Pennsylvania fees and taxes built into the price of each gallon of gas is slightly over 50 cents. For New Jersey the combined number is 14.5 cents.
New Jersey is hardly the low tax promised land, however. It is only one of two states (Maryland being the other) that has both an estate tax and an inheritance tax. In comparison, Pennsylvania has only an inheritance tax. New Jersey is in first (highest) place on a percentage basis for residential property taxes. For owner occupied residential property the annual taxes are equal to 2.38% of the home’s value. In Pennsylvania the factor is 1.54%. If that does not seem like a big spread, view it on a percentage basis. The tax in New Jersey for a given home value is on average 55% more than in Pennsylvania.
The Foundation’s report is fascinating even for someone who normally wants to think as little about taxes as possible. If you are interested in how Pennsylvania and other states treat, on a comparative basis: corporations, cigarettes, candy, wine and beer (to name a few categories), this document may be of interest to you. It is available on the Tax Foundation’s website, taxfoundation.org.
– Rod Fluck