From the Pennsylvania Budget and Policy Center (http://www.pennbpc.org):
The limitation on the state and local tax deduction in the final GOP tax plan will lead to a tax increase for almost 9% of taxpayers in the Philadelphia suburbs. Those hardest hit are in the upper middle-class.
HARRISBURG — Newly available data shows that the Trump-GOP tax cut bill will raise the taxes of about 18% of upper middle-class Pennsylvanians in suburban Philadelphia largely because of the limitation on state and local tax deductions.
Even after a compromise was reached on limiting the state and local tax deduction (SALT), the $10,000 cap on combined property and income or sales tax deductions has a substantial effect on taxpayers with higher incomes who pay more in income, sales and property taxes. This provision of the tax bill is the main reason that 11.8% of Pennsylvanians in the 81st to 95th percentile, with incomes between $111,490 and $231,900 will see their taxes go up an average of $1,440 by 2019. About 5.7% of all taxpayers in the state will see their taxes go up.
The impact is even greater in the suburban congressional districts around Philadelphia represented by Republicans Pat Meehan (CD-7), Ryan Costello (CD-6), and Brian Fitzpatrick (CD-8), largely because more people deduct more state and local taxes in these districts than in any others across the state. Both incomes and property taxes are higher higher in the Philadelphia suburbs than in other parts of the state.
In the state as a whole, 28% of taxpayers deduct an average of $11,170 in state and local taxes. However, in these three districts, 44% of taxpayers deduct an average of $13,548. (We exclude the 13th Congressional district from this analysis because about half of it is located in Northeast Philadelphia. The data in the Montgomery County part of the 13th district would look very similar to the 6th, 7th, and 8th districts.)
We don’t have precise data about the impact of the limitation on state and local tax deductions in these three suburban Philadelphia congressional districts but our rough estimate is that more than 18% of upper middle-class taxpayers in the 81st to 95th percentile of taxpayers will see their taxes go up. About 8.75% of all taxpayers in these congressional districts will see their taxes go up.
Now, normally, we at the Pennsylvania Budget and Policy Center would not complain about upper middle-class taxpayers paying higher taxes. We believe that given the serious public investment deficit in the country as a whole, those with higher incomes should pay more. However, we do think it is grossly unfair for upper middle-class taxpayers to pay more in taxes in order to give unnecessary tax cuts to the richest Pennsylvanians and wealthy businesses. Our latest estimate is that in 2019 the top 1% of Pennsylvanians, with an income of $575,640 or more will get an average tax cut of $53,580.
Full details of the impact of the limitation on the state and local tax deduction on not just Pennsylvanian taxpayers but also on the ability of the state to solve its persistent budget and public investment deficits can be found in our recent blog post.
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