Why Pennsylvanians resist paying higher taxes

By Anthony R. Wood

Inquirer Staff Writer

Taxes hold a special place among Pennsylvanians - right along with potholes, power outages, and poison ivy.

So when Gov. Rendell proposed a temporary 16 percent hike, from 3.07 to 3.57 percent, amid the current budget crisis, he stressed the positive: Pennsylvania has one of the lowest income tax rates in the nation.

That is accurate.

But while the wage levy is the commonwealth's biggest tax source, it represents only about 30 percent of state and local taxes collected in Pennsylvania, according to government figures.

When all taxes are taken together, Pennsylvania's tax burden - by most measures, and those who have tried to measure agree that no method is perfect - is more or less comparable to those of most other states, despite the low wage-tax levy.

But most Pennsylvanians evidently feel they are paying enough already.

"When I hear the governor say, 'We need this, we need that,' I totally disagree," said Rob Ciervo, who lives with his wife and two children in Newtown Township, Bucks County. "Spending is just going to have to be cut."

"Clearly there's resistance to a tax increase," said Peter A. Brown, assistant director of the Quinnipiac University Polling Institute, which last week found that by a 2-1 ratio, Pennsylvanians oppose raising the income levy.

"We are overtaxed," Ciervo said, referring to his own situation, a quintessential Pennsylvania tax saga.

Ciervo pays a 1 percent local earned-income tax atop the state levy. His property taxes are about $6,500 a year, and his school district, Council Rock, tacks on an "occupational assessment" tax, one of several taxes that the state allows schools and towns to levy. That one cost his household $340 this year.

He would be paying even more if he worked in Philadelphia, where his 1 percent local tax would jump to 3.5 percent, but he works in New Jersey, where he is director of the Rutgers-Camden Learning Center.

Taxes consume more than 15 percent of his income, more than double the state average, which is 6.7 percent, according to the Federation of Tax Administrators.

That study found the average Pennsylvania per-capita burden to be exactly the national average: 6.7 percent.

And Ciervo's tax burden doesn't include what his family spends in sales tax, the other big bopper in the state treasury.

Of the $25.5 billion the state collected in the last fiscal year, about $8 billion came from the sales tax, compared with $10 billion from the income tax. On average, a Pennsylvanian spends about $700 a year in sales taxes.

In the Quinnipiac poll, those surveyed said that if they had to drink the budgetary poison, they'd prefer to take it with a sales-tax hike.

But some tax analysts hold that the wage tax is fairer, even though under Pennsylvania's flat-rate income tax, the wealthy pay less tax than they would in a state, such as New Jersey, with a graduated-rate income tax.

"The advantage is at the top," said Steve Herzenberg, economist at the Keystone Research Center in Harrisburg. Nevertheless, the center says, a wage-tax increase is a better option than a raise in the sales tax.

Why? Pennsylvania waives or discounts the wage tax for about a fifth of all taxpayers, including many of the very poor and elderly, and it doesn't tax Social Security, so people on the lower end of the economic ladder get a break.

But no one escapes the sales tax.

Brian Roberts, chief executive officer of Comcast Corp., pays the same tax on a hot dog as the people who empty his wastebaskets. Phillies star Chase Utley pays the same as the ushers at Citizens Bank Park.

What states have discovered is that the best antidote for higher taxes, better even than government efficiencies, is OPM - other people's money, said Bill Ahern, an economist with the National Tax Foundation.

More than ever, he said, states are involved in a cash-scramble free-for-all to collect revenues from out-of-state residents. State treasuries all over the nation are counting on visitors to contribute through taxes on sales, hotel rooms, and car rentals, as well as other levies.

Pennsylvania evidently hasn't played that game very well. The foundation, using very different methods from the Federation of Tax Administrators, ranked Pennsylvania No. 11 in its burden analysis. Why so high? In its calculations, the foundation included the estimated amount of taxes that Pennsylvanians paid in other states, and that bumped up the total.

By contrast, Pennsylvania didn't fare well in luring out-of-state tax money, ranking No. 30 in the foundation's analysis.

The state Revenue Department questions those numbers, and the ranking is misleading because the state has no control over what people spend elsewhere, said Don Hassel, deputy secretary for tax policy.

In the tax foundation study, New Jersey, which has the Shore and its casinos, and Delaware, with its bounty of corporate headquarters, ranked in the top 10. Alaska was No. 1, the result of revenue generated by the trans-Alaska oil pipeline.

"Pennsylvania doesn't have what we call a revenue gusher," Ahern said. "It's not like Vegas in Nevada, or oil in Alaska, or Disney World in Florida."

Similar to Ciervo, in this economic climate, Keith Chamberlain would like his state officials to find ways to cut costs.

"There are probably a lot more things they can do before they come after you and me and the consumer," said Chamberlain, of Spring City, Chester County, a New Mexico transplant who operates a medical-training business.

"I'm opposed to all increases," said Jean Jones, owner of the Li'l Corner Cafe restaurant in Atglen, Chester County. "I pay enough."

These days, tax-increase phobia is a national phenomenon, Quinnipiac's Brown said.

"Voters don't want to pay more taxes normally," he said, "and in these times they really don't want to pay more taxes."

Contact staff writer Anthony R. Wood at 610-313-8210 or twood@phillynews.com.

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