Gov. Wolf Proposes Tax Hike, 'Major Changes' To Tax System

HARRISBURG, PA — Pennsylvania Gov. Tom Wolf on Wednesday proposed a significant hike in the state income tax but asserted that lower-wage earners would be exempt from paying it.

In unveiling his proposed 2021-22 state budget, Wolf recommended raising the state's personal income tax from 3.07 percent to 4.49 percent. But he contended that taxes actually would decrease or stay the same for about two-thirds of state residents and the increase would impact only the highest wage earners.

"This budget makes major changes to our tax system," Wolf said in an address delivered by video to the state Legislature because of the coronavirus outbreak. "It actually reduces the tax burden on Pennsylvania families earning $84,000 or less. It also proposes a major tax reduction for Pennsylvania businesses."

The proposal, which Republicans later called "dead on arrival," increases the allowances for tax forgiveness to $15,000 for single filers, $30,000 for married filers and $10,000 allowance for each dependent. Filers with incomes at or below those thresholds will receive 100 percent tax forgiveness.

The percentage of tax forgiveness declines by 1 percentage point for each $500 above the threshold for 100 percent forgiveness. For example, families with two children making less than $84,000 will receive a tax cut while a family of four making $50,000 will have their taxes eliminated.

"This is a historic tax cut for working-class families in Pennsylvania," Wolf said. "It will help working-class and low-income Pennsylvanians build financial security and reach for a brighter future."

Wolf's overall budget proposal is certainly not a done deal, as the Democratic governor needs the Republican-controlled General Assembly to approve the spending plan. By law, the new budget has to be adopted by July 1.

Senate Republican leaders called the budget proposal “dead on arrival," saying the plan is "out of touch" with Pennsylvanians and small businesses that are struggling during the COVID-19 pandemic.

“The Governor could not have picked a worse time to propose a 46.3 percent increase in the personal income tax given the struggles Pennsylvanians continue to face during the worst pandemic of our lifetime," Senate Appropriations Committee Chair Pat Browne said in a statement. " This major tax increase and massive spending plan will devastate working families and small business owners, many who already cannot afford their current tax burden, are unemployed or have been forced to close their business."

Wolf is calling for more than a $1.3 billion increase in basic education funding, a $200 million boost for special education, $25 million more for the Pre-K Counts program and an additional $5 million for Head Start.

Additionally, Wolf is proposing using $199 million from the state Horse Racing Development Fund to develop the Nellie Bly Tuition Program that wold provide financial assistance to full-time students attending a Pennsylvania State System of Higher Education university.

The governor wants to increase the minimum teachers' salary in Pennsylvania from $18,500 to $45,000. He also advocates raising the state's minimum wage to $12 an hour beginning in July and raising it to $15 by 2027.

The Pennsylvania State Education Association applauded the move to raise the minimum teacher salary.

“Educators play a crucial role in their students’ lives and shouldn’t have to scrape by to make ends meet,” association president Rich Askey said. “Right now, thousands of hardworking educators are taking on second and third jobs and still don’t earn enough to raise a small family. Raising the minimum educator salary will help those educators and encourage even more talented young
people to enter this profession and stick with it.”

Wolf also called for a natural gas drilling severance tax that would pay for a workforce development program. The tax would generate $3 billion over 10 years, he said.

In outlining his budget plan, Wolf reiterated a number of proposals he previously has advocated, including:

• Appropriating $145 million in Workers Compensation Security Fund reserves to allocate to businesses harmed by the coronavirus outbreak.
• Legalizing recreational marijuana.
• Implementing criminal justice system reforms, such as providing training for county level public defenders and court-appointed attorneys.
• Improving the professional licensing process to knock down barriers to entering high-demand professions.
• Implementing a wide-ranging ethics plan that he contends would make state government more accountable.

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