Who are the biggest ‘Makers’ and ‘Takers’ of Pa. tax dollars? | Analysis

February 19, 2019 6:30 am

Data visualization by Tom Ferrick Jr., used by permission.

By Tom Ferrick Jr.

One popular image of state government is that of a huge, unwieldy bureaucracy with a voracious appetite for taxpayers’ hard-earned money, spending nearly $33 billion this year alone on God knows what.

This image does not comport with reality.

It’s best to see state government as a redistribution machine, where billions of dollars in tax revenue is fed into a hopper, a switch is flipped, the machine whirs, and the most of the money is sent back out across the 67 counties in the Commonwealth.

Some of it pays for state services that are rooted in the counties such as the Pennsylvania State Police (6,076 employees), and the departments of Transportation (11,265 employees) and Corrections (15,132 employees)

In 26 counties, state government is among the top three employers.

But much of the money – close to $20 billion – is returned directly to counties, school districts and local governments as grants and subsidies, with distribution determined by formulas (designed to promote fairness) and sometimes political whimsy (designed to promote re-election).

Inevitably, residents of some counties pay more in taxes than they get in state grants and subsidies; others get more than they give. There are winners and losers.

The Makers and Takers?

Who wins in this divvy?

To find out, my website, Facing the Future, compiled a list of all the taxes paid by residents of each county, and compared it with a detailed list of all the state grants and subsidies sent to each county.

In a perfect world, for every dollar in taxes paid a dollar in state grants would be returned. But this is not a perfect world.

The reality is that there is a large disparity among the counties, with 40 getting more than they give, while 27 counties get a lousy rate of return, as little as 40 cents on each dollar in taxes their residents pay.

But, this is not Wall Street, where success is measured in an investor’s rate of return.

This is government of the people, by the people and for the people. We have a system whereby our wealth is used for the common good – the common weal, to use an old phrase. This is why we call Pennsylvania a Commonwealth.

It’s an intrinsic and central job of government to redistribute, to level the playing field.

It’s when you apply a political/ideological frame to this process where it gets messy. As former U.S. House Speaker Paul Ryan, R-Wisc., once famously put it, America is divided into the Makers and Takers — where the productive help the indolent, where the winners must prop up the losers.

And then there’s Philly

Speaking of which, there is Philadelphia.

The city is one of the biggest winner (or is it Taker?) in the divvy. For every dollar Philadelphians pay to the state in taxes, the city gets back $2.57 from the state. (Throughout this analysis, I’ve divided a county’s population into its state tax and grant totals to come up with a per-capita figure to equalize differences in population.)

This will not come as a surprise to people who live outside the Philadelphia area.

In political lore, Philadelphia is a beast of the East, a sinkhole into which the state keeps pouring money (For the record, Philadelphians pay $1.4 billion in state taxes and get $3.7 billion in state aid.).

It’s a belief that fits neatly into the popular conservative view that tax dollars are wasted on the city, which is filled with entitlement junkies.

This does not comport with reality.

There are three reasons why the city gets so much money from the state: one is the size of its school district. With enrollment at 199,000, it is larger than all 37 school districts in Delaware and Montgomery Counties combined (188,000 students).

As such, Philadelphia benefits from the same formula-driven state aid programs for education. Other districts get aid from the same grant programs, just not in the volume as our state’s one mega-district. The city gets $1.6 billion in state money from 15 education grant and subsidy programs.

Another reason is the city’s dubious distinction of having so many poor people – a number that has stayed at or near 25 percent of the population for more than a decade.

It gets money under the same formulas used for all human services programs in the state, but its client list is many times bigger. It totals $723 million for an array of human services programs, including $378 million for child welfare alone.

The third reason is that the city is the transportation hub for the region. The mass-transit agency SEPTA, which serves commuters in five-counties, is headquartered in the city.

SEPTA and its affiliated agencies get $831 million in state grants. Since there is no way to parse those sums into share by county, it must be counted as money for Philadelphia.

If it wasn’t for the wealth of residents in the Philadelphia suburbs and adjoining counties, the state would up the proverbial creek without a paddle.

Life, by the numbers

The 27 “Maker Counties” on this list paid a total of $13.8 billion in taxes, and got back $9.3 billion in state grants. Their rate of return averaged 64 cents in aid for every dollar sent to Harrisburg. For Montgomery and Chester Counties, the rate was 40 cents on the dollar.

Of the 40 “Taker Counties,” Forest County (pop. 7,340) was No. 1, getting a 262 percent return in state aid for every dollar in state taxes paid. Philadelphia is No. 2 at 257 percent. Rounding out the Top 5 were Cameron County (240 percent), McKean County (228 percent) and Clarion (201 percent), with a combined population of 84,400 people.

Are these rural folk indolent entitlement freaks? No, most are industrious. Their poverty rate averages 13 percent, which is also the state’s average. But, the counties are too small to benefit from economies of scale and they don’t have the level or concentration of wealth as other counties.

Another example: Cameron County in north-central Pennsylvania, has one school district, just like Philadelphia, but it covers an area 2.5 times larger than the city. The district enrolls just 571 students and it relies on the state for 68 percent of its $12.4 million budget.

These smaller counties could not stand on their own without state aid.

The list of 40 “Taker Counties” includes more populous counties as well, most of them clustered in western Pennsylvania. Their wealth has been depleted by the departure of residents and jobs and an economy sagging from the loss of industries such as steel and coal. They need those additional state dollars to keep their school districts and human services afloat.

The bottom line

Whenever the state has cut spending, as it did under former Republican Gov. Tom Corbett, the needs haven’t disappeared. When it came to education in particular, the state’s 500 school districts had to make it through the storm by cutting services and raising local taxes, usually real estate taxes.

In recent years, the pressure on local human service agencies has increased, while state aid has often flat-lined.

The opioid epidemic has added tremendously to the misery index in these counties. In 2016, according to a U.S. Drug Enforcement Agency report, Philadelphia ranked No. 5 in the state in drug overdose deaths.

As of last November, Fulton County, a rural county (pop. 14,590) along the state’s southern tier, ranked No. 1. The state has increased funding for drug treatment and prevention programs.

With its grants and subsidies, the state provides crucial support for local schools and services that would deteriorate or perhaps even collapse without this aid.

There is a great irony here.

If you laid a template over the counties so dependent on state aid over the boundaries of state House and Senate districts, you would see that these areas send deeply conservative lawmakers to Harrisburg, a number of them Tea Party-inspired members who are resolutely anti-tax and anti-government.

For the last eight years, they have formed a solid cadre in the state House in particular to stifle any attempt to raise taxes. As a result, the state is running a structural deficit of $1.5 billion that can be erased only by cutting state spending, raising taxes or some combination of both.

To these legislators government is the problem, not the answer. Less spending is good, more is evil. Taxes are anathema. If government would only get off people’s backs, these politicians say, we would all be better off.

This does not comport with reality. Not at all.

Tom Ferrick Jr. is a reporter, editor and columnist who has covered Pennsylvania government and politics since the 1970’s. He is the editor of Facing the Future, where this piece first appeared. 

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