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Pennsylvania Among ‘Terrible 10′ Most Regressive Tax States

10:50 am in Uncategorized by ThirdandState

By Chris Lilienthal, Third and State

Working families in Pennsylvania pay a far higher share of their income in state and local taxes than the state’s wealthiest earners, according to a new study by the Institute on Taxation and Economic Policy (ITEP).

Pennsylvania’s tax system scored so poorly that it made the list of the “Terrible 10” most regressive tax states in the nation.

The Pennsylvania Budget and Policy Center (PBPC) co-released the report, Who Pays? A Distributional Analysis of the Tax Systems in All 50 States, with ITEP. PBPC Director Sharon Ward made the point in a press release that “No one would deliberately design a tax system where low-income working families pay the greatest share of their income in taxes, but that is exactly the type of upside-down tax system we have in Pennsylvania.”

Middle-income families in Pennsylvania pay more than double the share of their income in taxes than the very wealthiest Pennsylvanians, while low-income families pay nearly three times as much as top earners, the report found. Get more details on the report, including a Pennsylvania fact sheet, here.

PA State & Local Taxes: Shares of family income for non-elderly taxpayers
The report should bury once and for all the myth of the makers vs. the takers. Low-income families in Pennsylvania are paying much more of their income in state and local taxes than the top 1%.

Families who qualify for state personal income tax forgiveness still pay large shares of their earnings in sales, local income and property taxes, the report found. At the same time, wealthy taxpayers benefit greatly from tax laws that allow them to write off property and income taxes from their federal taxes. This is, at best, a modest benefit for middle-class families and no benefit to very low-income earners.

Pennsylvania’s flat income tax contributes to its regressive tax ranking. Without a graduated tax rate that rise on more affluent earners, the state’s income tax does little to offset more regressive sales and property taxes.

That’s why Pennsylvania should amend the state Constitution to enact a graduated personal income tax. Even without a constitutional change, the state could set a higher income tax rate on investment income, which goes primarily to wealthy Pennsylvanians, without raising the rate on wage earners.

The Reports of Unions’ Death Are Greatly Exaggerated

2:50 pm in Uncategorized by ThirdandState

By Stephen Herzenberg, Third and State

Workers Rising Banner

Weakening unions could be trouble for the middle class.

There’s a good deal of crowing in conservative circles this week about the new 2012 numbers on union membership. Union membership nationally fell by about 400,000, to 14.4 million. Union membership in Pennsylvania declined 45,000, including 59,000 in the private sector.

Of course, for anyone who cares about, say, the American Dream, democracy, and rising living standards, the newest numbers are bad news. A simple chart put together by the Center for American Progress shows that unions are vital to the middle class. As unions have weakened, so has the share of income going to middle-income workers — and the gap between the 1% and the 99% has mushroomed.

As this blog has noted, inequality undermines not only economic opportunity, but it also slows economic growth and makes our democracy less responsive to typical families and the public good (and too responsive to rich special interests).

One silver lining in the new numbers is the great variation that exists across states. Unions are growing in some places. Another silver lining is that the weaker unions get, the more evidence we get that this is a bad thing. Evidence such as the fact that the top 1% of the population took home 93% of the increase in income in the United States in the last year for which we have data. And evidence such as the skills shortage in U.S. manufacturing: surprise, surprise, if you pay workers poorly and don’t invest in them, you can’t attract and retain the factory talent you need.

Fifteen years ago, we outlined why America needs “new unions for a new economy” — and noted that we couldn’t see how to restore widely shared prosperity without a revival of unionism. The evidence for our position grows with each day.

But beneath the overall numbers, even in Pennsylvania and even in manufacturing, there are signs of revival. Take, for example, a unionized Schott Glass plant near Scranton, which is pioneering a new labor-management apprenticeship program.

To paraphrase Mark Twain, the reports of unions’ death are greatly exaggerated.

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Post-Labor Day Thoughts: Middle Class Can’t Afford Another Lost Decade

8:13 am in Uncategorized by ThirdandState

By Mark Price, Third and State

Labor Day 2012 is behind us, but the challenges confronting the middle class are not.

As we do each year around this time, the Keystone Research Center has released the State of Working Pennsylvania. My co-author, a.k.a El Jefe, had a Labor Day op-ed in the Harrisburg Patriot-News where he laid out the theme of this year’s report — namely, that the middle class in Pennsylvania and the U.S. cannot afford another lost decade.

The next three figures lay out the major elements of this year’s State of Working Pennsylvania: employment growth over the last decade has been weak (Figure 1.10); as a result, incomes over the last decade declined (Figure 1.11); and in the first year of the recovery and of the new decade, income inequality resumed its growth as the top 1% increased their share of all income (Figure 5.1). 

With job growth weak and many policymakers advocating that we lay off more teachers and continue to put off needed investments in infrastructure, we are very concerned that working and middle-class families may end the next decade with less income from work than they started with in 2010.

Abandoning Pennsylvanians

4:31 pm in Uncategorized by ThirdandState

A blog post by Chris Lilienthal, originally published at Third and State.

Governor Tom Corbett unveiled a 2012-13 state budget Tuesday that abandons middle-class Pennsylvanians and our most vulnerable citizens.

The Pennsylvania Budget and Policy Center has a full analysis of the Governor’s proposal. Here’s the quick version.

With this budget, the Governor continues to turn his back on middle-class families who rely on good schools and affordable college tuition.

Help for the most vulnerable Pennsylvanians is reduced or eliminated. Tens of thousands of families and children have already seen health and other services terminated. This approach is not about finding efficiencies or cutting waste but rather cutting off help to people who have been hit hardest by the recession.

And while there is a call for greater accountability for every dollar in spending, businesses are let off the hook based on claims that they will create jobs in exchange for tax cuts that now total more than $1 billion.

This is not the path to a stronger economy or a better Pennsylvania.

We’ll have more to say in the weeks ahead. For now, you can learn more by reading our analysis.

PA Must Reads: The Failure of School Choice and the Food Industry Eats Your Tax Dollars

8:12 am in Uncategorized by ThirdandState

Today's typical public school lunch (Photo: .imelda, flickr)

Today's typical public school lunch (Photo: .imelda, flickr)

A blog post by Mark Price, originally published at Third and State.

An op-ed in The New York Times this morning points out that “school choice” has increased educational inequality.

If you want to see the direction that education reform is taking the country, pay a visit to my leafy, majority-black neighborhood in Washington. While we have lived in the same house since our 11-year-old son was born, he’s been assigned to three different elementary schools as one after the other has been shuttered. Now it’s time for middle school, and there’s been no neighborhood option available.

Meanwhile, across Rock Creek Park in a wealthy, majority-white community, there is a sparkling new neighborhood middle school, with rugby, fencing, an international baccalaureate curriculum and all the other amenities that make people pay top dollar to live there.

Such inequities are the perverse result of a ‘reform’ process intended to bring choice and accountability to the school system. Instead, it has destroyed community-based education for working-class families, even as it has funneled resources toward a few better-off, exclusive, institutions.

On Sunday, another op-ed detailed how food manufacturers and food service companies are allegedly fleecing taxpayers while delivering food with little or no nutritional content.

PA Must Reads: What Went Wrong and the Confidence Fairy Is Back!

8:29 am in Uncategorized by ThirdandState

A blog post by Mark Price, originally published at Third and State.

Over the next year, The Philadelphia Inquirer will be updating a series from 1991 titled “America: What Went Wrong,” by Donald L. Barlett and James B. Steele. This morning, Barlett and Steele take on the legacy of Apple Computers. 

The death of Steve Jobs was followed by an avalanche of superlatives — brilliant, genius, and visionary among the more common. He was likened to Leonardo da Vinci, Albert Einstein, and Thomas Edison.

But in the case of Edison, there was one significant difference that went unmentioned. For more than a century, just one of Edison’s inventions alone — the incandescent lightbulb — was manufactured at numerous locations in the United States, providing employment for millions of Americans across family generations.

The Apple home computer, not at all. After only one generation, all the Apple manufacturing jobs in America disappeared, as the work of building and assembling the machines was turned over to laborers in sweatshops in China and other countries. Jobs that should have provided employment for Americans for decades to come were terminated

While Barlett and Steele explore what went wrong, the Pittsburgh Post-Gazette’s series Middle of Nowhere continues today with a survey of major events and policy choices that are thought to be important to creating the middle class in America.

Bill Dunkelberg of the National Federation of Independent Business (NFIB) has a rather gloomy column in The Philadelphia Inquirer about the economic outlook.

Small-business owners remained pessimistic, with more than 25 percent reporting weak sales as their top business problem. The October survey of the National Federation of Independent Business indicated 5 percent of owners think the current period is a good time to expand their operations.

Eighty-one percent of the 350,000 businesses belonging to NFIB expected conditions to be no better or even worse in the next six months. Thirty-nine percent expect their real sales volumes to fall, and just 23 percent expect improvements in their businesses.

Despite his own data indicating that the chief problem in the economy is a lack of demand, Dunkelberg writes that what is holding employers back from hiring is the likely failure of the supercommittee to make deep cuts in federal spending. Paul Krugman regularly refers to this kind of magical thinking as belief in the confidence fairy. In fact, this morning Krugman suggests that the likes of Dunkelberg are plagued by a cruel romanticism.

Just to be clear, this is not an anti-European rant, since we have our own pseudo-technocrats warping the policy debate. In particular, allegedly nonpartisan groups of ‘experts’ — the Committee for a Responsible Federal Budget, the Concord Coalition, and so on — have been all too successful at hijacking the economic policy debate, shifting its focus from jobs to deficits.

Real technocrats would have asked why this makes sense at a time when the unemployment rate is 9 percent and the interest rate on U.S. debt is only 2 percent. But like the E.C.B., our fiscal scolds have their story about what’s important, and they’re sticking to it no matter what the data say.

So am I against technocrats? Not at all. I like technocrats — technocrats are friends of mine. And we need technical expertise to deal with our economic woes.

But our discourse is being badly distorted by ideologues and wishful thinkers — boring, cruel romantics — pretending to be technocrats. And it’s time to puncture their pretensions.

Speaking of romantics, the editorial page of the Pittsburgh Tribune-Review takes issue with our report on trends in public-sector employment.

The liberal Keystone Research Center is duly concerned about Pennsylvania’s public-sector job losses. The center’s solution? Hire more public employees, of course.

What the Keystone researchers don’t say in their report, ‘Public-sector Job Losses Put Brakes on Pennsylvania’s Recovery,’ is that to increase government hiring, the state, school districts and municipalities would have to raise taxes.

As the news pages of the Pittsburgh Tribune-Review regularly report, school districts and municipalities are already raising taxes while cutting employment. To prevent further tax increases and job losses in a period of high unemployment, there are proposals before Congress to extend aid to state and local governments. In our report, we also note that state policymakers could help improve the situation here by doing the following:

  • Spending more of the state’s revenue surplus;
  • Enacting a natural gas drilling tax that supports shared statewide priorities like education as well as the environment and local communities;
  • Maximizing the potential for Marcellus Shale development to create jobs for Pennsylvania workers; and
  • Bond-financing infrastructure, school construction and energy efficiency investments at a time when borrowing and construction costs are both low.

What is Pat Toomey Doing? Inequality and America’s Future

8:30 am in Uncategorized by ThirdandState

A blog post by Stephen Herzenberg, originally published at Third and State.

Let me connect three dots for you. Draw your own conclusions about the impact of Pennsylvania Senator Pat Toomey’s proposal in the super committee to reduce the federal deficit.

Dot Number 1 — The American middle class is shrinking: The New York Times reports this morning that the middle class is shrinking in America — based on where people live.  In 2007, the latest year studied, 44% of families lived in middle-income neighborhoods, down from 65 percent of families in 1970. A third of families lived in very high-income or poor neighborhoods now, up from just 15 percent of families in 1970. The case example used to illustrate this national trend — the Philadelphia metropolitan area.

Dot Number 2Toomey proposes to increase after-tax inequality further: In the super committee, Congressional Republicans, led by Senator Pat Toomey, have advanced a plan that they say would raise revenues by closing tax loopholes and eliminating tax breaks while cutting spending by $1.2 trillion. But a closer look shows that, of $3.5 trillion raised by the elimination of loopholes and tax breaks, $3.2 trillion would lower tax rates for the wealthiest. The plan would lower taxes at the top a lot more than simple extension of the Bush tax cuts for the very rich. So the impact of Senator Toomey’s proposal would be to increase economic inequality after taxes: affluent families would pay less in taxes and the middle class and the poor would face cuts in Social Security, Medicare, and other social programs.

Dot Number 3High inequality undercuts core American values (opportunity, democracy) and weakens our economy: High levels of economic inequality — such as now exist in the United States — undermine intergenerational mobility (also known as “the American Dream”). (For evidence, see the links in this earlier blog post on inequality or this one or see this online video by Richard Wilkinson.) Such inequality also contributes to the erosion of political democracy — shifting the country further from one person, one vote towards one dollar, one vote. And, third, high levels of inequality undermine economic and productivity growth. Let’s process that again: the end of the American Dream; the erosion of democracy (wasn’t America — and Pennsylvania — the birthplace of democracy?); and a weaker economy. Three strikes and you’re out.

Question Number 1Why? On a day when a national newspaper is using Philadelphia to illustrate the erosion of the middle class, why is Senator Toomey championing ideas that threaten the most cherished American values (opportunity, democracy) and the country’s future living standards? You’d have to ask him.