This paper puts forward a plan, which we call the Fair Share Tax, that would take a major step toward fixing Pennsylvania’s broken tax system and raise the revenues we need to invest in the public goods that are critical to creating thriving communities and individual opportunity in our state: education, infrastructure, protection for our air and water, and human services.
- The Fair Share Tax divides our Personal Income Tax into two parts: 1.) a tax on wages and interest, and 2.) a tax on income from wealth (dividends; net income [from a business, profession, or farm]; capital gains; net income from rents, royalties, patents, and copyrights; gambling and lottery winnings; and income from estates or trusts.)
- The Fair Share Tax increases the tax on income from wealth from 3.07% to 6.5% and decreases the tax on wages and interest from 3.07% to 2.8%.
- Under the Fair Share Tax, 58.3% of taxpayers will see their taxes go down, 26.2% will see no change in their taxes, and only 15.4% will see their taxes go up.
- The Fair Share Tax brings in $2 billion in new revenue. Of that $2 billion, 50% comes from the top 1% of families, 72% comes from the top 5% of families, and 88% comes from the top 20% of families.
- Out-of-state taxpayers will pay 15.6% of the $2 billion increase in revenues.
- There is little variation in the impact of tax from one county to another or one legislative district to another. The percentage of taxpayers in a county that see a decrease or no change in their taxes ranges from 71% to 90%, with all but nine counties in the 80% to 89% range. In both rural and urban counties, an average of 85% of taxpayers will see their taxes go down or remain unchanged under the Fair Share Tax. Much the same is true in state legislative districts.
- Even after implementation of the Fair Share Tax, the effective rate on the top 1% of Pennsylvania taxpayers will be only 3.6%, less than that of any neighboring state and only 45% of the rate found in New York and New Jersey.