Governor Tom Wolf released his budget proposal last month and, as many expected, he called for massive tax increases. That much is unsurprising: Wolf has been trying to raise our taxes for years. The new twist: he’s calling for a tax that is both unwise and unconstitutional.

In his budget address, Wolf lamented that “Pennsylvania has one of the lowest personal income tax rates in the nation,” as though that were a problem to be remedied. But the bigger problem, to the governor’s mind, is not just that Pennsylvanians keep more of our own money than New Jerseyans or New Yorkers. It’s that we all pay the same rate. “[W]hen you go to file your taxes every year,” said the governor, who comes from considerable family wealth, “you have to pay the same exact rate as I do.”

Wolf wants to change that. The problems with his plan are plain enough: as the state struggles to emerge from recession, the last thing its government should be doing is raising taxes. This is doubly true as state coffers have benefited from larger than anticipated revenues.

But there is another problem Wolf fails to mention: his proposal violates the state constitution. 

That sounds an awful lot like a bunch of different tax brackets.

Article VIII, section 1 of Pennsylvania’s constitution holds that “All taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws.” This is commonly called the “uniformity clause,” and it is the first part of the rule that matters here. When the constitution holds that all taxes shall be uniform upon the same class of subjects, that means that no two people can be taxed at different rates on the same thing.

That is not to say that different taxes cannot be levied at different rates. The sales tax, property tax, and income tax are set at different rates because the “class of subjects” of those taxes is different. What would not be allowed would be for the state to tax my income differently from yours, or my property differently from my neighbor’s. 

This is not a novel interpretation; the constitutional provision has been understood to mean exactly this since it was adopted in 1874. The state Supreme Court applied this rule to a state income tax in the 1935 case of Kelley v. Kalodner that “a tax which is imposed at different rates upon the same kind of property, solely on the basis of the quantity involved, offends the uniformity clause.”

The legislature tried to tax income at different rates in 1971 when it passed then-Governor Milton Shapp’s proposed 3.5% levy. The rate was flat, but was only on “taxable income” as defined by federal law. That meant that the state was incorporating all the deductions and exemptions from federal tax law, making their “flat tax” not so flat after all. 

The Pennsylvania Supreme Court saw through this ruse in Amidon v. Kane, holding that “Although the Tax Reform Code of 1971 purports to impose a flat 3 1/2% tax upon ‘taxable income’, the concept of ‘taxable income’ already reflects the federal personal exemptions for the taxpayer and his qualified dependents… Thus, built-in to the Tax Reform Code of 1971 are exactly the same elements of nonuniformity as were condemned in [Kelley].” The tax was struck down, and the legislature had to settle for a truly flat tax at 2.3 percent. That tax, increased over the years to 3.07 percent, is the one Pennsylvanians pay today on our incomes — regardless of how much we earn.

Nothing about the state constitution’s uniformity clause has changed since the court’s ruling in Amidon, though there have been attempts to alter it. Constitutional amendments were proposed in 1913 and 1928 but were rejected by the voters. The entire constitution was revised in 1968 by a state convention, but the referendum authorizing the convention specifically prohibited changing the uniformity clause. Efforts in the legislature to amend the clause since then have failed.

How, then, does Wolf expect his clearly non-uniform tax hike to work? He proposes increasing the tax rate from 3.07 percent to 4.49 percent, which alone would be burdensome on most taxpayers, but at least constitutional. But then he proposes “tax forgiveness” for lower income brackets. His plan “increases the allowances for tax forgiveness to $15,000 for single filers, $30,000 for married filers, and $10,000 allowance for each dependent. Filers with incomes at or below these thresholds will receive 100 percent tax forgiveness. The percentage of tax forgiveness declines by 1 percentage point for each $500 above the threshold for 100 percent forgiveness.”

That sounds an awful lot like a bunch of different tax brackets. And in tax law, courts will always apply form over substance. Just as your boss can’t avoid payroll taxes by calling some of your salary “a gift,” the state can’t pretend it is taxing income equally when it proposes to “forgive” certain amounts. Wolf’s proposal is a fraud.

Speaking with Angela Couloumbis and Cynthia Fernandez of Spotlight PA, Marc Steir, director of the left-leaning Keystone Research Center, admitted that the proposal’s constitutionality was questionable because of the uniformity clause. Steir noted that another section of Article VIII includes a “poverty exemption so you can reduce taxes for people with low incomes.” Section 2 of that Article, passed in 1968, does indeed allow that the legislature may “[e]stablish as a class or classes of subjects of taxation the property or privileges of persons who, because of age, disability, infirmity or poverty are determined to be in need of tax exemption or of special tax provisions”. But that was also the law in 1971 when the court struck down a much more modest work-around scheme.

It looks like an exception that could swallow the rule — but logically, it cannot be. The state constitutional convention of 1968 was not authorized to repeal the uniformity clause, so it could not legally have done so. The most one could say of section 2 is that it allows for some minor exceptions from taxation for a few needy people. 

One might agree that the poor bear too heavy a tax burden in Pennsylvania, but that is not license to ignore the law.

Is that what Wolf’s proposal does? Hardly. He would create vanishing brackets that would apply to everyone, not just the poor or infirm. Wolf admits this explicitly when he says in his proposal that “families with two children making less than $84,000 will receive a tax cut while a family of four making $50,000 will have their taxes eliminated.” If tax forgiveness applies to people making $84,000, it can hardly be said to be related to “poverty”. Likewise, a $10,000 allowance for each dependent is not related to “age, disability, infirmity or poverty.” It would certainly be helpful to young parents to keep more of their own earnings, but it is hard to see how this fits into the state constitution’s narrow exceptions to uniformity.

Wolf’s plan is too cute by half. One might agree that the poor bear too heavy a tax burden in Pennsylvania, but that is not license to ignore the law. The Keystone Research Center actually has a more constitutional solution than Wolf in its “Fair Share Tax” plan. Unlike Wolf, the KRC admits the reality of the constitution, noting that “any class of income must be taxed at one rate.” Their plan would divide the income tax into two taxes, one on wages and interest, the other on everything else: dividends, royalties, capital gains, business profits, etc. They would tax the former at a slightly lower rate and the latter at a much higher one.

I am not sure the state supreme court would see this as any less of a dodge, and there are practical problems inherent in raising taxes on the people who would have the easiest time moving themselves or their assets out of the state. But at least it is a proposal within the rules by which we are all governed. If Wolf wants to tax the rich, he may certainly propose doing so. But he must do it within the law. 

Kyle Sammin is a senior contributor to The Federalist, co-host of the Conservative Minds podcast, and resident of Montgomery County. He writes regularly for Broad + Liberty. @KyleSammin

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