IssuesPA

May 1 2006

Is Pennsylvania a high tax state or a low tax state, compared to its peers? It's a difficult question to answer objectively. IssuesPA examined the data.

(May 2006) Are your taxes too high? IssuesPA measured how Pennsylvania’s tax burdens measure up against its peer states.

IssuesPA combined state and local taxes to provide a more accurate picture of the overall tax burden. This is important because states pay for services in different state/local proportions. Combining state and local taxes gives the best overall picture of state and local services provided to residents. For example, some states rely on local taxes to support education much more than others.

So how does Pennsylvania compare?

First, two caveats: 

  • The numbers cited are for the entire state, yet there are wide discrepancies from one part of the state to another. 
  • Second, the comparisons are based on 2002 data and don’t account for changes since then.

One way to view comparative tax burdens is to measure them based on a percentage of personal income. In 2002, Pennsylvania ranked relatively low – 34th – for combined state and local taxes. Pennsylvania’s taxes as a percent of personal income were 10.1%, slightly below the average of 10.4% for the nation’s 50 states and the District of Columbia. For more detail, see the IssuesPA Scorecard.  

A second method takes the amount of taxes collected, divided by a state’s population, to compare the average tax paid by each person – taxes per capita. The table below shows Pennsylvania’s comparative position measured on a per capita basis. This breakdown shows how much Pennsylvania relies on each type of tax compared to other states, as well as the total tax burden.

Taxes Per Capita - Pennsylvania vs. US Average

 Tax

 Tax Per Capita

 PA Rank in US

 

PA 

US 

 

 Property

$884.97

$969.26

 29

 General Sales

 $608.32

 $774.33

 36

 Individual Income

 $771.34

 $704.43

 19

 Corporate Income

 $97.20

 $97.76

 14

 Total Taxes

 $3,051.88

 $3,142.56

 22

The taxes per capita comparisons put Pennsylvania closer to the top but still solidly in the middle in total taxes. For a comparison with PA’s competitor states, see the IssuesPA Scorecard.  Pennsylvania ranks in the middle third for most of the components, but with some degree of variance – ranking below the mid-point for property and sales taxes, and above it for individual income and corporate income.

As this table below illustrates, the net result for Pennsylvania is a mix of tax receipts that’s close to the national average. 

Tax By Type, as a Percent of Total Taxes Paid
PA vs. US 
    

 

Property 

Sales 

Indivudal Income 

Corporate Income 

Other 

 Pennsylvania

 29.0%

19.9% 

25.3% 

3.2% 

22.6% 

 US Average

 30.8%

24.6% 

22.4% 

3.1% 

19.0% 

What’s behind the numbers?

Property Taxes: A number of factors influence this ranking. The type of property subject to the tax varies from state to state. For example, Pennsylvania exempts tangible personal property – machinery and equipment, inventories and cars – from the tax base, while a number of other states don’t. There’s significant variation in the percentage of market value included in the tax base and local property tax rates applied to the base. Pennsylvania imposes one rate within each taxing jurisdiction, while some states have multiple rates depending on the type of property. And Pennsylvania allows local governments to impose a local tax on personal income, which reduces the dependence on local property taxes. For more detail, see the IssuesPA Scorecard.

General Sales and Use Taxes: In Pennsylvania, they’re relatively low. This ranking likely is due as much to Pennsylvania’s narrow tax base – items and services subject to tax – as the combined state and local tax rate. For more detail, see the IssuesPA Scorecard.

Individual Income Taxes: Although Pennsylvania’s state personal income tax rate is one of the lowest in the nation, Pennsylvania is average in taxes based on personal income. Why? The personal income tax base is broader than most states and there are few exemptions and deductions. Also, Pennsylvania is among only a handful of states where local governments can impose a local income or wage tax. For more detail, see the IssuesPA Scorecard.

Corporate Income Taxes: Pennsylvania’s rank – 14th – in corporate income relative to statewide personal income is based solely on the corporate net income tax. Additional taxes paid by business – such as capital stock and franchise tax, property taxes, sales and excise taxes, and business and occupation taxes – aren’t included. So this isn’t a "true" reading of Pennsylvania’s ranking for all state and local taxes imposed on businesses. For more detail, see the IssuesPA Scorecard.

Bottom line? Compared to other states, Pennsylvania as a whole is neither a high or low tax state when measuring total taxes and specific types of taxes. Why? Pennsylvania’s comparatively low sales tax burden and moderate property and income taxes.