Is Wolf’s progressive Pa. tax plan unconstitutional?

Tom Wolf, the Democratic nominee for governor, wants to restructure Pennsylvania income taxes so middle-class and poor families would pay less and some wealthy residents would pay more.

But Republican Gov. Tom Corbett claims Wolf’s plan violates the state constitution, which says that all taxes must be uniform. Wolf strongly denies that charge.

WHYY/NewsWorks consulted the experts to sort out their arguments. 

First, here’s a primer on how income taxes work in Pennsylvania now: Whether you’re a millionaire or a garbage man, your income is taxed at a rate of about 3 percent.

Here’s an example of how income taxes would work under Wolf’s plan, with the important caveat that he said his proposal is far from final and the following figures are hypothetical: Wolf would raise the income tax to, say, 5 percent while exempting roughly $30,000 of income.

When asked if Wolf’s plan is constitutional, none of the experts WHYY/NewsWorks spoke to gave a simple “yes” or “no” answer.

Tax lawyer Stewart Weintraub said Wolf has a “defendable position” because his proposal appears to meet the constitutional requirement that all taxes be uniform.

“All taxpayers paying the personal income tax would be treated identically,” said Weintraub. “All of them would have the first $30,000 of income tax-free. And all of them would be paying the same tax rate on the income in excess of $30,000.”

Sure, all taxpayers might get the same exemption under Wolf’s plan. But tax lawyer Kelly Phillips Erb points out that the end result would vary widely.

According to an analysis by the subscription-only news service Capitolwire, Pennsylvanians earning less than approximately $77,800 annually would get a tax cut, and everyone else would get a tax hike.

“If you just go back to the constitution and look at the exact wording,” said Phillips Erb, “that’s not a uniform rate upon the same class of subjects.”

A precedent, of sorts

The plot grows thicker, though. Despite its uniformity rule, Pennsylvania offers tax relief to some low-income residents under a program similar to the federal Earned Income Tax Credit. A family of four making $32,000 a year, for instance, can get back 100 percent of its state income taxes.

Tax attorney Patti Spencer said that’s not all that different from Wolf’s plan.

“That has the effect, the same effect, as if it would be a graduated rate that low-income taxpayers are taxed at a different rate than high-income taxpayers,” she said. “That has been approved, and that has been valid, and that’s been around for years.”

Critics retort that the state can provide tax relief to impoverished residents because of a 1968 constitutional amendment aimed specifically at the poor. What Wolf is trying to do, they said, would help the middle-class too.

“In his plan, he refers to it as the middle class receiving a tax cut,” said Phillips Erb. “He actually uses that exact term.”

Wolf has indeed stated in his campaign materials that his proposal would “result in every middle-class family receiving a tax cut.”

Tax lawyers seem to agree on one thing, at least: Wolf’s plan would likely be challenged in court.

But is it a good idea?

Putting aside the question of whether Wolf’s plan is constitutional, WHYY/NewsWorks also asked Corbett’s campaign to evaluate it on the merits.

Campaign spokesman Bob Salera said Corbett supports the state’s uniformity rule and “would not support an amendment to allow a scheme like Tom Wolf’s.”

“It’s simply a matter of fairness,” said Salera. “We have one of the lowest income tax rates in the United States. He would like to keep it that way.”

While noting that the state provides tax relief to low-income residents “to ensure that people who truly can’t afford to pay more in taxes get some exemption from it,” he added, “we believe that it makes sense that every person pays the same tax rate.”

We also asked Tom Wolf’s campaign if he supports Pennsylvania’s uniformity clause or would prefer to ditch it. Katie McGinty, chair of the pro-Wolf PAC Campaign for a Fresh Start, avoided directly answering the question several times.

“I’m really not trying to be cagey about it all,” she said. “Where he’s focused is in giving a fair shake to working families. He does not believe that anything he is proposing entails changing the state constitution. It just means making sure you’re looking out for working- and middle-class families.”

All tax experts quoted in this story said they have never worked for Corbett or Wolf. However, Weintraub has donated $100 to Wolf’s campaign, according to public records.