The U.S. House recently passed a tax-reform plan with only Republican votes, including U.S. Rep. Keith Rothfus (R-Sewickley), U.S. Rep. Mike Kelly (R-Butler) and all other Republican representatives from Pennsylvania. The bill would offer a tax reprieve to low- and middle-income individuals initially, but those cuts would expire; by 2027, some low- and middle-income individuals would eventually be paying more in taxes, according to the Congressional Budget Office. The ultra-wealthy (those making $5 million and up) and corporations, however, would be paying significantly less indefinitely. Politicians like Rothfus justify this bill saying expanded economic growth from tax cuts will lead to better wages for workers.
“Making our business-tax rates competitive would bring more investors to America and increase the pool of funds available to help startups and business expansion,” Rothfus wrote in a recent op-ed in the Pittsburgh Post-Gazette. “It also would encourage American companies to invest their earnings at home and create more jobs in the United States.”
In the Pennsylvania state House, under the leadership of Speaker Mike Turzai (R-Marshall), Republicans have been reluctant for years to pass any tax increases, especially on fracking companies. Instead, the chamber recently passed a budget proposal that would generate the required revenue to fill the state’s budget deficit mostly through gambling expansion (bringing slot machines and other gambling devices to truck stops and airports).
But studies show that gambling disproportionately hurts the poor. A 2014 University of Buffalo study showed that gambling addicts are twice as likely to come from low-income neighborhoods, and a 1999 study from the federal government showed there are more low-to-middle-income earners who are “lifetime gamers,” compared to upper-middle-to-high-income earners.
Ironically, an October study shows that Pennsylvania legislators might be smarter to tax high-income individuals to cover the state’s bills.
California-based tech company Trove ranked states and metro areas by their discretionary income (how much money people have after their bills are paid and taxes deducted). Trove co-founder Michael Pao says his company, which has created an app to make moving and storage more streamlined, created the discretionary-income study so people could see which regions in the U.S. offer the largest amount of take-home pay.
Pennsylvania ranked “fair” overall on how much its residents had left over each year (about $5,300 per year). But, that number appears to be driven mostly by high-income earners.
For occupations that are in the top 20 percentage of average pay, Pennsylvania ranked 11th in the country, in terms of discretionary income. For occupations in the bottom 20 percent of average pay, Pennsylvania ranks 37th. High-income earners in the state have significantly more money left over each year than low-income earners.
Pao says the data shows the bottom half of Pennsylvania earners are “probably having trouble making ends meet.” When City Paper informed Pao about the state’s push to expand gambling as a way to fill the state budget, he says the state might want to look at other options.
“If you wanted to take a chunk out of people’s paychecks, and not from gambling [expansion], it makes sense to take it out of white-collar professions,” says Pao, referring to Pennsylvania workers.
And this discrepancy is even more evident in Pittsburgh. Of the 18 cities in Pennsylvania that Trove studied, for highly compensated workers, the city ranked fifth for the top 20 percent’s discretionary income. However, for workers earning in the bottom 20 percent, Pittsburgh only ranked 17th.
Lawyers, with their average Pennsylvania salaries of about $136,000, particularly have it good in the state, as on average they have more than $58,000 left over each year. In Pittsburgh, lawyers have more than $61,000 left over each year. By comparison, health-care support occupations (nurses, orderlies, home health-care aides), which make up one of the largest sectors of low-to-middle-incomes jobs in the state, make about $30,000 a year with a yearly discretionary income of -$8,600. On average, health-care support workers pay more in taxes and expenses than they earn in Pennsylvania, according to Trove.
Pao also points out that Trove’s study estimates that Pennsylvania overall is the top state in the Northeast in terms of discretionary income. The study also estimates that Pennsylvania has some of the lowest taxes among states in the Northeast, with only Vermont and Maine having lower yearly taxes, on average.
On average, Pennsylvanians pay $11,377 in taxes a year. And the non-partisan Institute on Taxation and Economic Policy said in 2015 that Pennsylvania had the sixth most regressive tax system in the U.S., with lower-income people taxed at higher rate than the wealthy. According to ITEP, the poorest 20 percent of the state's population paid 12 percent of their income in state and local taxes, while the richest 1 percent only paid 4.2 percent of their income.