Where the taxes aren't

Editorial Notebook

September 29, 2007|By Peter Jensen

The specter of paying higher state taxes in the near future has given rise to a familiar chorus in cyberspace: Call them the "That's the final straw, I'm moving to Pennsylvania" singers. Mostly, the group's members grumble anonymously on the Internet, posting messages of anger and betrayal. They are unhappy to see government once again reaching deeply into their pockets (to phrase it far more politely than the typical posting).

It's not enough for them to express irritation. These unhappy - few, many, enough to field a baseball team, it's hard to say - believe their lives will improve vastly if they haul out their luggage, pack up the good china and leave. For them, the grass looks much greener - or at least less taxed - up north in the Keystone State.

Might that be a sensible decision, at least from a purely economic point of view? Maryland can easily be portrayed through various statistical measures as either a tax hell (No. 2 among states for income tax collections per capita) or a tax heaven (50th in state and local spending as a percentage of personal income).

So let's consider the more basic question: Does Pennsylvania have much lower tax rates? In some areas, yes, and some, no. It often depends on the questioner's life situation. Overall, it's really kind of a push.

Take the sales tax, for instance. Gov. Martin O'Malley would like to raise it from 5 percent to 6 percent. Pennsylvania's is already 6 percent except in the Pittsburgh and Philadelphia metropolitan areas, where it's 7 percent. There's an exemption for clothing that Maryland doesn't allow, but overall, score one for the Free State. The home team also fares well for overall property taxes and for corporate taxes (even with Mr. O'Malley's proposed 1 percent increase).

Maryland's gas tax also looks mighty fine compared with what motorists north of the Mason-Dixon face. Maryland's tax on gasoline is 23.5 cents a gallon and might go up 0.8 cents next year if the governor's plan is adopted. Pennsylvania has had a 31.2 cents per gallon gas tax for the past decade and charges more for diesel.

But let's also give them their due. Pennsylvania has a much lower income tax rate - albeit with fewer deductions and with significantly higher tax rates in some localities. If you live in Philadelphia, for instance, you pay about as much overall as you would if you lived in Maryland.

Still, making a decision because of small differences in tax rates would be like buying a house because you liked the color of the mailbox and the height of the flagpole. It's hardly the most important factor in such an important choice. Surely, such basics as proximity to work and quality-of-life issues - good schools and family-friendly neighborhoods - ought to rank higher.

Housing might be cheaper in southern Pennsylvania, for example, but it means adopting a more rural lifestyle (with all its pros and cons) and likely a longer commute on scenic but nonetheless clogged arteries. With gas prices hovering just under $3 per gallon, adding another 10 miles each way to your daily drive might cost more than $700 per year for the typical motorist.

One can make a stronger case for moving to Delaware to avoid taxes. The state has no sales tax, and with some exceptions (for all its pro-business rep, the corporate income tax rate is actually higher than Maryland's), Delaware's tax rates are generally lower.

Of course, expecting to realize a financial benefit assumes one wouldn't have to commute from Delaware to Baltimore or Washington (the distance would easily nix the savings). And then there are the realities of living in the Diamond State, such as lower wages, worse public schools (at least as measured by college admissions test scores) and a much higher infant mortality rate (exceeded only by West Virginia and a half-dozen of the poorer Southern states).

That's not to knock Delaware, Pennsylvania or any of our neighbors. But to paraphrase the late Erma Bombeck, the grass is always greener right over the septic tank. It's fair to grouse about taxes, but let's not be too hasty with the moving vans.

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