September 16, 2021
  • September 16, 2021

Pennsylvania could see biggest post-pandemic sales tax increase in nation

By on July 16, 2021 0

  • Sam dunklau

(Harrisburg) –– New report shows Pennsylvania showing signs of strong economic recovery in key area.

Researchers at the left-wing Tax Policy Center have found that Keystone state had one of the biggest sales tax cuts in the country last year. But now forecasters predict Pennsylvania will reap nearly 15 percent more this year than last year. It would be the biggest increase of any state.

It’s a much different tax place than even the state’s Independent Fiscal Office thought Pennsylvania would be at this point.

In June 2020, just months after the pandemic-induced business closures and closings, IFO forecasters predicted the state would lose up to $ 1.045 billion in sales taxes and tax. ‘use, but would still collect around $ 12 billion by June of this year. By the time this month began, its official revenue estimate predicted Pennsylvania to bring in $ 14.3 billion.

“Almost every state got it wrong,” said Lucy Dadayan, senior research associate. “They thought their income would not be as good as them. “

Dadayan said the encouraging prediction is partly supported by what happened last year: fewer people lost their jobs than initially thought and more people diverted their money from services like restaurants. to products like groceries.

“They ended up staying home, not taking a vacation and spending that money on renovating the house or buying goods for home offices,” she said.

Pennsylvania also doesn’t rely too much on things that went missing during the pandemic, like tourism, and it charges a six percent sales tax on goods and services online. The Tax Policy Center report highlights both as ways for the state to recover more quickly from the damage caused by the pandemic.

But economists like Dadayan say that while these are good signs, some big economic questions remain.

“What is going to be a permanent change and what is going to be a temporary change as a result of the pandemic,” she said. Are people going to spend as much on goods as they did during the pandemic? “

Depending on what happens, Dadayan said the state may have to brace for another drop in income.

But state lawmakers already have a plan for it: They chose to divert most of the $ 7 billion in US bailout money from Pennsylvania and put additional tax revenue in a savings account in the United States. ’emergency.

“There is no crystal ball. We don’t know how things will be two years from now, ”Dadayan said. “But if they have the money to meet the immediate needs of different programs and services, then yes, of course: put it in a savings account.”

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