New Year, New Taxes in Pennsylvania
The new year is always a great opportunity to shed vices like smoking and binge eating. For state and local lawmakers, their guilty pleasure tends to involve overspending and sticking taxpayers with the bill. If Pennsylvania lawmakers thought to quit this dirty habit in 2025, they are off to a bad start.
Four of Pennsylvania’s five most populous counties can expect increased property taxes. From Cumberland County’s modest 4% hike to Lackawanna’s whopping 33% tax increase, more than 5 million Pennsylvanians will pay higher county taxes in 2025.
Allegheny County will see the biggest hike. The county executive pitched an astonishing 47% property tax increase, which the county council negotiated down to 36%. Compromise in politics is always appreciated, but public officials must do better than double-digit tax hikes.
One Allegheny council member argued Pittsburgh is better off than other major cities, such as Atlanta and Jacksonville, which raised taxes by more than 50%. There’s just one problem, though: Those cities are growing, each adding more than 100,000 residents since 2020 creating pressure for more services. In contrast, the Pittsburgh metro area continues to shrink. Since 2020, the U.S. Census Bureau reports population is down nearly 32,600.
These county-level property tax hikes are a prelude to an even more dire situation in Harrisburg. State government has lived beyond its means for years. This fiscal irresponsibility reached a new peak during the COVID-19 pandemic. The avalanche of pandemic-era federal stimulus money gave officials cover to ratchet up the spending. However, that federal faucet has since dried up. Now, state lawmakers face the ugly reality of a substantial $3.6 billion budget deficit. Meanwhile, state spending grows faster than state revenue – all without any real plans to cut spending.
The signs are the deficit could be larger than previously calculated. Data from the first half of fiscal year (FY) 2024–25 show monthly revenue collections fell below official estimates three times, while demand for costly government services, such as long-term care, continues to rise. In December alone, collections were $87.2 million below the official estimate, with a FY-to-date $97.1 million shortfall.
Another worrisome pattern is where state and local spending priorities intersect: education. Last June, Harrisburg passed a whopping $1.3 billion increase in education funding. In fact, lawmakers have boosted education funding $4.1 billion in just four years. Despite this fiscal boon, dozens of Pennsylvania school districts still raised property taxes.
There’s one possible solution to this problem: the Taxpayer Protection Act (TPA).
The TPA would create a legal guardrail – called an index – that pegs government spending to annual population growth and inflation. For example, if Pennsylvania’s population grows 2% and the inflation rate is 2%, state spending increases cannot exceed 4%. This way, government grows with, not faster than, the economy. The TPA would force state and local governments to limit spending, protecting taxpayers from future tax hikes.
Had Pennsylvania enacted TPA in the past, Pennsylvania wouldn’t be in this current fiscal mess. In the last five years, lawmakers and the governor kept spending growth within the TPA index only once. If they stuck to the TPA limit, we’d be facing a $2.8 billion surplus instead of a $3.6 billion deficit.
Truth be told, time is of the essence. In addition to looming local and statewide tax hikes, working families could also face higher federal taxes next year. Passed in 2017, the Tax Cuts and Jobs Act expires this year. If Washington, D.C. cannot get its act together, Pennsylvanians of all income levels will face higher taxes.
Over the next six months, the governor and state lawmakers will negotiate a new budget. That budget will determine if Pennsylvanians will face another spike in their cost of living or if state politicians can turn over a new leaf and rein in spending.
Lawmakers have many tools at their disposal to save Pennsylvanians from another round of tax hikes. A combination of prioritizing spending, allowing education funding to follow students, reforming our state’s burdensome regulatory environment, and instituting effective tax policy can balance the budget and eliminate the threat of even more tax hikes on Pennsylvania families.
Only then will lawmakers kick their tax-and-spend habits.
