How Would Tom Wolf’s Tax Plan Impact You?

Yesterday, we released an analysis of the impact of Tom Wolf’s education spending and tax proposals, finding Pennsylvania’s income tax rate would have to increase by more than 121 percent to pay for just two of Tom Wolf’s major education proposals. But the increase could actually be much higher. A story in Capitolwire (paywall) yesterday quotes Wolf’s answer to a question about the ambiguity surrounding his tax proposal:

“If you’re in the 70,000-90,000 dollar range as an individual – and you could double that if you’re married – you should not pay any more in taxes. And people making below that would get a break. That’s my goal.”

Wolf’s proposal would certainly violate the uniformity clause (Article VIII, Section 1) of Pennsylvania’s Constitution because it would necessitate two types of tax exemptions: one for those filing singly and one for those filing jointly in order to ensure couples who make $180,000 or less don’t get hit with a higher rate.

But if Wolf were to propose a tax structure that lowered taxes for those making less than “$70,000 to $90,000” and generated the nearly $4.6 billion needed to pay for his education spending, what would that require?

Using $80,000, the middle point of Tom Wolf’s suggested dollar range, as our “break-even point”—the point where taxpayers would begin to see their tax bills rise, we have outlined what a Wolf tax structure might look like.

To achieve the goals stated above, there would need to be a “universal exemption” of $52,200, requiring the tax rate to increase from 3.07 percent to 8.85 percent.

That is, Pennsylvania’s income tax rate would increase by more than 188 percent.

Tax Rate Needed to Pay for Wolf Education Proposals, $52,200 Exemption
Total Taxable Income With Exemption	$170,419,261,600
Tax Rate	8.85%
Total Revenue Raised	$15,082,104,652
Revenue Under Current Tax Structure	$10,442,963,000
Additional Revenue Under Wolf Plan	$4,639,141,652
Source: Pennsylvania Department of Revenue, Income Tax Statistics

While this model would reduce the tax bill for the vast majority of those making less than $80,000, it would result in dramatically higher taxes for families and small businesses earning more than that. The tax burden would rise by $1,160 for a household with $100,000 in income, and $3,472 for a household making more than $140,000.

Income Level	$50,000	$70,000	$100,000	$140,000
Tax Bill at Current Rate	$1,535	$2,149	$3,070	$4,298
Tax Bill at New Rate (With exemption)	$0	$1,575	$4,230	$7,770
Increase in Tax Bill	-$1,535	-$574	$1,160	$3,472

What may be most astounding is the impact on Pennsylvania’s economic competitiveness.

Currently only the nine states with no income tax, or an income tax just on investment income, have a lower top rate than Pennsylvania.

But under this plan, with an 8.85 percent rate, Pennsylvania would jump 33 other states. As a result, we’d have the 8^th highest state income tax rate in the country.