The House Majority Policy Committee, chaired by Rep. Martin Causer (R-Cameron/McKean/Potter), heard testimony Wednesday reaffirming the potentially devastating economic impacts of Gov. Tom Wolf’s budget proposal on working families across the Commonwealth.
Much of the testimony focused on the governor’s proposed 46% increase in the Personal Income Tax, a levy that is paid by both families and a large percentage of the state’s employers.
“This plan is nothing but a massive, $6 billion tax increase for families and businesses at a time when both are really hurting financially,” Causer said. “It is exactly the opposite of what we should be doing to help our state recover from the impacts of the COVID-19 pandemic.”
In his testimony, Jared Walczak of the Tax Foundation countered the argument made by some that the Commonwealth has one of the lowest income tax rates in the nation by noting Pennsylvania applies its tax to a broader definition of income than any other state, and its local governments rely more heavily than most on earned income taxes, assessing those taxes at a very high rate. Those high local rates, combined with the governor’s proposed increase, would give Pennsylvania the highest flat-rate subnational income tax in the country at 8.37%.
“It is always important to look at the entirety of the tax burden on our citizens,” Causer said. “We should be looking to lessen that burden, allowing our working families and small employers to keep more of the money they earn to spend it as they see fit, rather than sending more of it to Harrisburg.”
Jason Skrinak, testifying on behalf of the Pennsylvania Institute of Certified Public Accountants (PICPA), addressed the portion of the governor’s tax plan that many perceive as a tax cut – his proposed expansion of the existing tax exemption for poverty. He cited concerns about the legality of the plan under the state Constitution, which requires uniform taxation. He also notes that even if special tax forgiveness provisions survived those challenges, workers will still see a lower income on a per-pay-period basis, as tax forgiveness is only provided as a refund when annual tax returns are filed.
Elizabeth Stelle of the Commonwealth Foundation noted the proposed income tax hike would result in a $1,500 tax increase for a family of four making the median family income, as well as affect roughly 855,000 small business owners who are struggling to survive the pandemic.
One testifier, Dr. Matthew Rousu, dean and professor of economics at the Sigmund Weis School of Business at Susquehanna University, focused his testimony on the impact of another Wolf initiative – an increase in the minimum wage. The governor has proposed increasing the wage to $12 in July and then annually by 50 cents until it reaches $15. Rousu testified about how the proposal would drive job losses that tend to harm younger workers and how it would disproportionately hurt smaller businesses that are less able to absorb the costs of automation technology larger businesses often employ to offset the cost of higher wages.
“Today’s hearing was telling. While the governor paints a rosy picture of his proposals, he glosses over the details, and we all know the devil is in the details,” Causer said. “We need to take a deep dive into how real people will be affected by this budget and ensure we develop a plan that will help, rather than harm, working families.”
The committee will hold another hearing about the impact of the governor’s proposal on small business impacts next Wednesday, March 3, at 1:30 p.m.
Representative Martin T. Causer
House Majority Policy Committee Chairman
67th District, Pennsylvania House of Representatives
Media Contact: Patricia A. Hippler