How Would PA’s Income Tax Compare?

The proverbial "other shoe" dropped today in the state budget deliberations when the Governor proposed a temporary, three year increase in the state’s personal income tax from 3.07% to 3.57%. The Governor says that even with the increase PA will still have the "third lowest" income tax rate.

Here’s what the latest data from the Tax Foundation shows on personal income tax rates in the nation. Seven states have no income tax; two tax just interest and dividends, not wages; that leaves 41 states with a personal income tax.

Pennsylvania and five other states (CO, IL, IN, MI, and UT) have flat income tax rates (as opposed to graduated rates). Right now PA has the next to lowest rate out of those six states. An increase to 3.57% would move it ahead of IN (3.4%) into second next to lowest (IN and IL, at 3%, would be lower). Only CO and PA have no standard deduction or personal exemptions according to Foundation data.

Going back to 2000 data, CO and MI have lowered their rates; UT moved from a graduated system to a flat rate; IL and IN made no changes; PA increased from 2.8% to the current 3.07%. A boost to 3.57% would represent a 30% increase in the income tax rate since 2004, when the rate was raised to the 3.07% level.