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Pennsylvania

The Facts on Pennsylvania’s Tax Climate

Here are some basic facts on Pennsylvania’s tax system and how it compares to other states:

Tax Freedom Day Arrives on April 21 in Pennsylvania
Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2008, Pennsylvania taxpayers had to work until April 21 to pay their total tax bill, ranking it 18th highest nationally. That's two days earlier than national Tax Freedom Day (April 23). The Tax Freedom Days of neighboring states are: New York, May 5 (ranked 3rd nationally); New Jersey, May 7 (ranked 2nd nationally); Delaware, April 14 (ranked 37th nationally); Maryland, April 28 (ranked 7th nationally); West Virginia, April 8 (ranked 47th nationally); and Ohio, April 17 (ranked 28th nationally).

Tax Freedom Day has been projected using the most up-to-date economic and budget projections from official government agencies. However, Tax Foundation estimates of average state and local tax rates for 2008 will not be released until later this spring as we await more up-to-date data from various government agencies.
Full study of Tax Freedom Day, nationwide and in each state

Pennsylvania's State/Local Tax Burden in 2007
Estimated at 10.8% of income, Pennsylvania’s state/local tax burden percentage ranks 24th highest nationally, near the national average of 11.0%. Pennsylvania taxpayers pay $4,405 per capita in state and local taxes, and per capita income is $40,942.
Pennsylvania's State-Local Tax Burden, 1970-Present

Pennsylvania's 2008 Business Tax Climate Ranks 27th
Pennsylvania ranks 27th in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. Neighboring states ranked as follows: New York (48th), New Jersey (49th), Delaware (9th), Maryland (24th), West Virginia (37th) and Ohio (46th).
50-State Comparison of Business Tax Climates (data only)
2008 State Business Tax Climate Index, Fifth Edition (full study)

Pennsylvania's Individual Income Tax System
Pennsylvania's personal income tax system consists of a flat rate of 3.07% on all personal income. Pennsylvania's top rate ranks 42nd highest among states levying an individual income tax. However, many Pennsylvania taxpayers also pay a local tax on earned income, commonly 1% or 1.5%, with Philadelphia well above that. Pennsylvania's 2005 individual income tax collections at both state and local levels came to $924 per person, which ranked 17th highest nationally.
50-State Table of Individual Income Tax Rates
50-State Table of State Individual Income Tax Collections
50-State Table of State and Local Individual Income Tax Collections Per Capita

Pennsylvania's Corporate Income Tax System
Pennsylvania's corporate tax structure consists of a flat rate of 9.99% on all corporate income. Among states levying corporate income taxes, Pennsylvania's rate ranks 2nd highest nationally. In 2006, state-level corporate tax collections (excluding local taxes) were $170.16 per capita, which ranked 16th highest nationally.
50-State Table of Corporate Income Tax Rates, 2000-2008
50-State Table of State and Local Corporate Income Tax Collections Per Capita and Per Household, 2005
50-State Table of State Corporate Income Tax Collections Per Capita, 2006

Pennsylvania Levies Sales Tax Above National Median; Gasoline Tax among Highest Nationally
Pennsylvania levies a 6% general sales or use tax on consumers, above the national median of 5.4%. State and local governments combined collected $1,103 per capita in general sales taxes in 2005, which ranks 36th highest nationally. Pennsylvania's gasoline tax stands at 32.3 cents per gallon, ranking 11th highest nationally. Pennsylvania's cigarette tax stands at $1.35 per pack of twenty and ranks 20th highest nationally. The sales tax was adopted in 1953, the gasoline tax in 1921 and the cigarette tax in 1937.
50-State Table of Sales and Excise Tax Rates
50-State Table of State and Local General Sales and Gross Receipts Tax Collections Per Household and Per Capita, Fiscal Year 2005

Pennsylvania Property Taxes: Middle of the Pack
Pennsylvania is one of the 37 states that collect property taxes at both the state and local levels. As in most states, local governments collect far more. Pennsylvania's localities collected $12,449,837,000 in property taxes in fiscal year 2004, which is the latest year the Census Bureau published state-by-state property tax collections. At the state level, Pennsylvania collected $68,389,000 in property taxes during FY 2004, making its combined state/local property taxes $12,518,226,000. That brings its per capita collection to $1,010 and ranking to 24th highest nationally.
State property tax collections per capita by state

Federal Tax Burdens and Expenditures: Pennsylvania is a Beneficiary State
Pennsylvania taxpayers receive slightly more federal funding per dollar of federal taxes paid compared to the average state. Per dollar of Federal tax collected in 2005, Pennsylvania citizens received approximately $1.07 in the way of federal spending. This ranks the state 28th nationally and represents a rise from 1995 when Pennsylvania received $1.05 per dollar of federal taxes paid and ranked 28th nationally. Neighboring states and the amount of federal spending they received per dollar of federal taxation paid were as follows: New York ($0.79), New Jersey ($0.61), Delaware ($0.77), Maryland ($1.30), West Virginia ($1.76), and Ohio ($1.05).
Comparing the amount of federal taxes sent to Washington with the amount of federal spending coming back to the state

Publications from The Tax Foundation