A new report finds Pennsylvania remains on a list of the “Terrible 10” — states with the most regressive tax policies.
The non-partisan Institute for Taxation and Economic Policy finds that the poorest residents pay nearly three times what the wealthy pay in taxes as a share of income. Middle-income earners pay twice as much as the richest residents.
The disparity is due, largely, to the state’s flat income tax rate. The report comes on the heels of a recent Standard & Poors study finding that states with unfair tax systems struggle to raise revenues needed to pay for services.
“It makes it really much harder to raise money to pay for critical investments that are good for the state, like public schools, like affordable college tuition, infrastructure — things like that,” said Sharon Ward, head of the left-leaning Pennsylvania Budget & Policy Center.
The “Terrible 10” distinction is not new for the commonwealth, which has ranked poorly in ITEP reports for the past decade.
States noted as having highly progressive income tax rates include Vermont, California, the District of Columbia, and Minnesota.
Gov.-elect Tom Wolf has proposed setting a graduated income tax rate. That would require the lengthy process of amending the state constitution. But Ward said an effectively graduated income tax rate could be achieved by tweaking tax policies to give low-income earners a break and wealthier residents a heavier load.
