Income tax plan raising $6.2B in revenue up for discussion

(The Center Square) – A new plan that raises $6.2 billion in revenue through a shift in income tax rates for Pennsylvania residents and businesses alike got its first hearing Friday.

House Bill 1773 proposes cutting wage and interest taxes by roughly one-third and nearly doubling the rate for passive income like lottery and gambling winnings, net profits, dividends and gains from rents, royalties, patents, copyrights and those derived through estates and trusts.

Supporters, including the five Democrats who sponsored the bill, say doing so will redistribute the burden so that Pennsylvania’s “most financially vulnerable citizens” will no longer struggle underneath the weight of a “longstanding regressive income tax.”

Rep. Chris Rabb, D-Philadelphia, said during the House Finance Subcommittee on Tax Modernization and Reform hearing that he’s introduced similar bills four times to no avail. He admonished his Republican colleagues for not participating in the discussion about the bill, even though he clarified it’s a starting point and not a final product.

According to the Pennsylvania Budget Policy Center’s 2019 analysis, the bottom 60% of income earners spend nearly twice as much of their income paying taxes as their wealthier counterparts.

Critics, however, note that a 12% tax rate on passive income – up from 6.5% – includes small business owners that employ 2.2 million workers.