(The Center Square) – Pennsylvania ranks 23rd in the country when it comes to overall tax burden, according to a new analysis.
The Keystone State’s property tax burden ranks 24th, individual income taxes at 19th and total sales and excise tax at 32nd according to personal finance website WalletHub’s 2021’s Tax Burden by State report.
WalletHub compared the states in property taxes, sales and excise taxes and individual income taxes as a share of a total personal income in the state.
WebHub financial writer Adam McCann said in the report a tax burden measures the proportion of personal income that residents pay toward state and local taxes, unlike tax rates, which vary based on an individual’s circumstances. Tax burdens aren’t uniform across the United States.
“Since the tax code is so complicated and has rules based on individual household characteristics, it’s hard for the average person to tell how they will be impacted,” McCann said.
The relationship between state tax burden and economic growth depends on the type of tax and other economic conditions, according to Annette Nellen, a professor at San Jose State University.
“For example, if the state has tax and other incentives or favorable rules for a particular type of industry such as high tech, economic growth might be greater because more tech firms may locate or expand in the state,” she said in the report.
Additional factors should be considered beyond taxes because some states have a higher cost of living - such as for rent and home purchase - than other states which can easily discourage economic growth even if the tax burden is lower than in other states.
Nellen said some state and local tax systems are better able to weather economic downturns but that the degree of impact and when it occurs will vary for different types of taxes for an economic downturn.
“If people are losing their jobs, the income tax is immediately affected,” she said. “Sales tax is likely impacted a bit more slowly when people reduce non-necessity purchases (such as furniture and clothes). Property taxes might be affected last.”
Most states have a mix of taxes to alleviate this impact and provide a tax base that can best weather economic downturns and pandemic and other disasters.
“States need to have rainy day funds to help even out ups and downs and have an effective system for maintaining and restoring these funds too,” she said.
The report indicated that Republican-leaning states have a lower tax burden than Democrat-leaning states, with Blue states overall getting a 19.32% rate compared to Red states at 31.36%.