Taxes

Income Inequality on the Rise

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

The Pittsburgh Post-Gazette runs with a story this morning on the latest data from the Congressional Budget Office on income inequality in America (PDF).  

If you thought it took millions to land in the top 1 percent of earners targeted by demonstrators, you should know the actual threshold is $343,927, according to IRS statistics for the calendar year 2009, the latest available ...

After-tax income for the richest 1 percent of Americans almost tripled from 1979 to 2007, according to a report from the Congressional Budget Office.

At the same time, people in the middle of the scale saw their incomes grow by just under 40 percent and those in the bottom 20 percent saw a gain of about 18 percent.

"The distribution of after-tax household income in the United States was substantially more unequal in 2007 than in 1979," the CBO said.

For some additional context, a household income of $349,850 or higher will land you in the top 1% of Pennsylvania tax filers, according to 2009 tax data from the state Department of Revenue. 

Jobs Down, College Tuition Up, School District Taxes Up and Policy Makers Are Focused On What?

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

Other recent Morning Must Reads from Third and State:

Monday: No Revenue for Public Transportation & Corporations Need Another Tax Loophole for their Jets

Tuesday: Mo Gas, Mo Problems

On Tuesday, the Keystone Research Center published a summary of the employment situation in Pennsylvania. With the release of September's jobs data, which included a loss of just over 15,000 jobs, a picture is emerging of a job market in Pennsylvania that is shrinking. The continued loss of public-sector jobs and relatively slow growth in private-sector jobs is the main source of weakness in the labor market. The bottom line is that although Pennsylvania ranked in the top 10 of states in terms of job growth early in this recovery, the Commonwealth has moved to the bottom 10 in the last five months.

Much of the public-sector job loss is driven by the fact that tax revenue has yet to fully recover from the recession, the end of federal Recovery Act funding, and state lawmakers' unwillingness to raise state revenues which has deepened state budget cuts.

Statement: Governor's Drilling Fee Plan Sells Pennsylvanians Short

Sharon Ward, Director of the Pennsylvania Budget and Policy Center, issued the following statement on Governor Corbett's proposed impact fee on drilling in the Marcellus Shale::

"Governor Corbett has proposed a small, limited fee that fails to capture for Pennsylvanians the true worth of this vast natural resource, and fails to fully offset the short and long-term damage that will be done by the industry. The proposal sells Pennsylvanians short.

"Pennsylvania has been called the Saudi Arabia of natural gas. The Commonwealth should do what resource-rich countries like Saudi Arabia have done and use gas revenues to invest in our communities and build a stronger statewide economy. A more robust fee would support infrastructure, public investments and jobs across the state and would provide additional revenue to local governments to pay for the impacts of drilling.

"Other proposals now before the Legislature would generate far more than the Governor's plan would for local and state impacts, and offer a better deal for Pennsylvanians.

"The Commonwealth should also move swiftly to put in place stronger regulations and improved enforcement to protect local communities and the environment. The best way to address the negative impacts of natural gas drilling is to avoid them.

“There is bipartisan support in the Legislature for a drilling tax or fee that supports shared priorities like education and health services, as well as local impacts and environmental protection. We hope the final drilling fee will adopt this approach and count all Pennsylvanians in.”

PA Tax Collections Strong So Far, September Will Tell Us More

A blog post by Michael Wood, originally published at Third and State.

Here is another look at General Fund tax collections in the first two months of Pennsylvania's 2011-12 Fiscal Year. As you can see, collections so far this year have exceeded pre-recessionary levels — a positive sign.

General Fund Tax Collections July and August

Revenue collections for September will be released as early as late Friday. September collections are important to monitor because they include quarterly corporate and personal income tax payments. They should give us a much better idea of what to expect in future months.

So far, so good.

Pa. Revenue Growth Strong in 2011-12, Despite Missing Official Estimates

A blog post by Michael Wood, originally published at Third and State.

Some state policymakers are concerned that Pennsylvania tax collections are trailing official revenue targets for the first two months of the 2011-12 Fiscal Year. However, Pennsylvania’s revenue collections for July and August are running well ahead of the same two-month period in 2010-11.

While actual tax collections are below official estimates, some of that underperformance may be attributed to a change in the way those revenue estimates were made, as the Pennsylvania Budget and Policy Center explains in our recent Revenue Tracker.

Could It Be the Weather?

A blog post from Michael Wood, originally published on Third and State.

The Delaware County Daily Times reprinted a story from the PA Independent (the state news service started by the Commonwealth Foundation) which mistakenly blames unions for the out-migration of taxpayers in the state.

Here is the claim:

The Tax Foundation, a Washington, D.C., tax policy nonprofit, tracks tax returns filed in every state to determine how shifts in population affect working by tracking the Social Security numbers of income tax returns filed with the IRS each year.

Between 1999 and 2008, Pennsylvania saw an overall decline of 84,000 tax returns. The top three destinations for people leaving Pennsylvania during that time — Florida, Virginia and North Carolina — are all right to work states. The data is the most recent available.

There are a couple of problems with this rationale.

1. Not many people move between states as a share of the population. According to data on the IRS's website for the period 2004 to 2009, Pennsylvania lost a net 21,847 filers. This equates with less than 0.2% of our population. Most people who move do so to neighboring states.

2. Included in these numbers are retirees. If you aren't in the workforce, I don't think workforce policies are high on your priority list.

The Property Tax Crisis in Philadelphia

This crisis has been long in the making; long enough that it stretches before the birth of most of our parents.

PlanPhilly has used some intuitive GIS techniques to show precisely how acute this problem is, and it is bad.

While the recession can be blamed for many of the recent occurrences of delinquency, that does not explain the very high rate of delinquency 5 years or more which predate the Great Recession. One particular block is interesting, the block of South Upland Street between 60th and 61st Streets; every single resident on this block is delinquent for 10 years or more.

Out of all American cities, Philadelphia holds the trifecta for the largest number of tax delinquencies, the highest dollar amount of delinquencies and the longest lifespan of delinquency; all the years of arrearages across all Philadelphia properties is over 720-thousand years.

Several properties have delinquencies stretching far back into the John F. Kennedy Administration.

It's clear that this broken system is crying out for reform.

Public Employment Job Losses a Drag on Economy

A blog post from Christopher Lilienthal, originally published on Third and State.

Add this to the list of reasons that the economic recovery is limping along. Our friends at the Center on Budget and Policy Priorities explain:

July’s employment report included more bad news from states and localities:  job losses are continuing. Since August 2008, state and local governments have slashed 611,000 positions, and the cuts have been getting worse — 340,000 of those jobs were lost in the last 12 months. July was the ninth consecutive month, and the 29th out of the last 35, in which total state and local employment shrank.

Three Years of State and Local Job Losses

And we haven't seen the last of the public sector job cuts. As the Center notes, many states have enacted new state budgets that make deep spending cuts sure to reduce public employment that much more.

So where are we seeing the most cuts? Cities, counties and other local governments, along with local school districts, account for the lion's share:

  • Local school districts have cut 229,000 positions.
  • Cities, counties, and other local governments have cut 237,000 positions.
  • State governments have cut 145,000 positions.

The Standard and Poor's Downgrade

A blog post from Mark Price, originally published on Third and State.

The economic news of the past two weeks has been decidedly grim.

On July 29, new data confirmed that the economy in the first half of 2011 grew much more slowly than necessary to bring down the unemployment rate.

A few days later, the bizarre debt-ceiling fight was resolved with agreement to cut nominal federal spending over the next two years. Economic forecasts prior to this deal put the U.S. unemployment rate at 8% at the end of 2012. Cuts to federal spending mean higher unemployment forecasts are on the way.

By the way, this morning the forecasters at Goldman Sachs increased their unemployment forecast for the end of 2012 to 9.25% — and that assumes Congress will agree to extend the current payroll tax credit before January.

Unless you are living off the grid, you couldn’t have escaped news that last week was brutal for the Stock Market. Then late in the day Friday, credit rating agency Standard and Poor's — after correcting a $2 trillion math error — decided to go ahead and downgrade the full faith and credit of the U.S. taxpayer from AAA to AA+.

Tax Flight Is a Myth, Report Finds

A blog post from Christopher Lilienthal, originally published on Third and State.

We’ve heard it before. If you increase state taxes, people will up and leave for lower tax states — especially the most affluent residents. You often hear the same argument used to support tax cuts.

A compelling new report from the Center on Budget and Policy Priorities busts this common myth advanced by those who oppose a balanced approach to budgeting and tax policy. Turns out Americans move from state to state for a variety of reasons, but tax levels rarely factor in.

Not surprisingly, cheaper housing and job opportunities are much more likely to drive people to move to another state than tax levels.

As the report finds, the effects of tax increases on migration are, at most, small — so small that states raising income taxes on the most affluent households can be assured of a substantial net gain in revenue.

The report cites numerous examples of research debunking the migration myth and, through case studies, shows how misinformation about the impact of taxes on migration can influence policymakers and the media. Those who support the migration myth often wrongly assume a cause-and-effect relationship, promote irrelevant findings, and inaccurately measure migration, the report found.

On the flip side, low taxes can prevent states from maintaining the kinds of public services that create jobs and build a strong economy — the very things that potential residents value.

State Spending Cuts Kill Private Sector Jobs

A blog post from Mark Price, originally published on Third and State.

Recent debates about the impact of state taxes and spending have taken place in a “fact-free” zone, where anti-tax advocates urgently warn that “taxes kill jobs” without offering any evidence that this is true.

Thanks to recent analysis by economist Adam Hersh at the Center for American Progress, we now have some fresh data on the health of the economy in states that cut their budgets in recent years compared to those that increased spending.

The verdict: Those states that made steep public spending cuts in the wake of the Great Recession have seen weaker economic growth in the years since. Budget-cutting states have experienced rising unemployment, fewer new private sector jobs and weaker economic growth than the states that increased spending.

While this analysis does not tell us whether the spending cuts caused the negative economic outcomes, it is clear that steep spending cuts are correlated with markedly worse economic performance.

This could all be very bad news for Pennsylvania, where lawmakers and Governor Corbett recently enacted a 2011-12 state budget with deep cuts to education, health care and human services. Overall, the budget cuts spending by an inflation-adjusted rate of 4%, as the Keystone Research Center notes in a new policy brief interpreting the Center for American Progress data.

More eco-cops to be layed off in new Corbett budget...

There's two ways to think about the ineffectiveness of Pennsylvania's Department of Environmental Protection as described in this video.

Of course, a lot of folks' prejudices tend them toward the former, but the evidence suggests that the real problem is the latter.

If we keep laying off eco-cops, do we really expect polluters not to try to get away with polluting more? And who can catch them but DEP? Answer: almost no one.

That's why Clean Water Action thinks the real environmental news today isn't the quibbling over a severance tax. It's the fact that the state's GOP has agreed on a budget that will cut environmental enforcement staff another $10 million.

Let's responsibly help the School District

During the last few months, the School District has been trying to close a staggering deficit. The Mayor has proposed two different tax increases to help the district--taxes that go directly to the district. The district is requesting $102M. This is roughly the same amount requested in City Council prior to resolution of the full day kindergarten and transpass issues. The administration proposes giving them $66M. It is $66M then that we need to solve for.

I am opposed to taxes that directly go into the Districts coffers (which is the current proposal). The only real accountability we will have over the District is putting money on the City side, not the district side, of the wall and tossing it over only after they have agreed with our priorities. The administration's plan does not do this.

Last week, an Education Accountability Agreement was signed between the City, District, and Commonwealth. It is nice but mostly theatre. Council has been pressing for greater accountability for the past many weeks, including at the District's May 24th budget hearing, in letters to Philadelphia's state legislators, etc. In fact, Councilman Clarke has proposed a mechanism to provide more funding to the District only if additional accountability measures were in place (Councilman Clarke made this proposal a week before the Education Accountability Agreement was signed or shared with Council)--essentially creating an accountability fund.

Throughout Council's budget hearings and meetings with the District this spring, the focus has been on making sure that programs that generate concrete, successful outcomes for kids are preserved. We have focused our efforts and scarce resources on preserving the existing programs that are proven to work – not create or expand new programs. This was again a theme during Friday's day-long hearing, in which I, Councilman Kenney, Councilwoman Sanchez, and others pressed the District on, for example, why it proposed to fund 18 days of summer school at a cost of $23M rather than 180 days of reduced class sizes at a cost of $21M.

With respect to increasing funding to the District, there is a path forward that provides the District with the additional $66M requested by the City last Friday without raising taxes.

• On the city side, the Administration can generate $6M through increased on-street parking rates; $10M through reductions identified during budget hearings that will not impact services; and $30M through reducing the year-end fund balance, which is proposed to be $50M (by way of comparison, the fund balance levels in FY10-14 Five Year Plan approved by PICA were as follows: FY10 = $2.988M; FY11 = $10.960M; FY12 = $31.377M; FY13 = $10.633M; and FY14 = $79.797M) – a total of $46M.

• On the District side, additional savings are possible by: (1) limiting summer school to those students who need the credits to graduate or move on to the next grade (savings of $10M); (2) keeping Promise Academies at their current size rather than expanding them from 7 to 17 schools (savings of $19M) – again, in this period of limited resources, we should be focused on maintaining existing initiatives that we know work for kids (early childhood education, accelerated schools, etc.), not expanding new programs; and (3) trimming some of the remaining fat in operations/administration – for example, the proposed almost $500K increase in the budget of the Communications Office (we think the savings could sum to $10M) – a total of $39M.

Thus, by making hard but not impossible choices, and without raising taxes, we can put on the table $85M to fund priority items at the District -- such as yellow bus service, reduced class sizes, accelerated schools, early childhood education, school nurses, extended day programs, and arts and music being some of the top priorities, which collectively cost $84M.

The education advocates who appeared before Council last Friday, including PCCY, testified that they were agnostic about where the additional funding came from and were, instead, squarely focused on making sure sufficient funding and accountability measures were in place. Parents United testified that there should be no more resources without accountability (don't get me wrong, they want resources).

I stand ready and willing to help the District find the resources it needs to maintain the programs that are working for our children, but I believe we can do so in a manner that improves accountability and avoids taxing our citizens even more than they are already taxed or relying on revenue measures that are untested subject to legal challenge.

It is time for a new era for education in Philadelphia

I am sitting here trying to think of how to write a clever email about what is happening in Philadelphia right now. But, I am a working mom, and with all the proposed cuts to educational programs here and across Pennsylvania, the end of school approaching, the field trips permission slips I have to find and sign and summer activities to sign up for… well – I am fresh out of clever today.

If you want to skip the narrative and just take action: Click here. We are asking our elected leaders to lead more and invest more to improve the quality of education in the City.

http://salsa.wiredforchange.com/o/6041/p/dia/action/public/?action_KEY=4...

Comparing Pa.'s Marcellus Shale Drilling Tax Plans

According to recent media reports, Pennsylvania state lawmakers believe a Marcellus Shale gas drilling tax will happen one way or another. The big question is just what it will look like.

Several bills, with bipartisan backing, have been introduced in the General Assembly to impose a drilling tax or fee on natural gas production in Pennsylvania's Marcellus Shale. The Pennsylvania Budget and Policy Center has a new report comparing details of the four most prominent plans introduced by Rep. Greg Vitali, Sens. John Yudichak and Ted Erickson, Rep. Kate Harper, and Senate President Pro Tempore Joe Scarnati.

Here are some of the key findings:

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