1. A COMPARISON OF PENNSYLVANIA AND MISSISSIPPI STATE TAXES B Y K I M B A N K S 2. PENNSYLVANIA INDIVIDUAL INCOME TAX oCompensation; oInterest, oDividends; oNet profits from the operation of a business, profession or farm; oNet gains or income from the dispositions of property; oNet gains or income from rents, royalties, patents and copyrights; oIncome derived through estates or trusts; oGambling and lottery winnings other than Pennsylvania Lottery winnings. Exemptions and Deductions oPennsylvania does not allow for a standard deduction or for personal exemptions oAllowable deductions against income: deductions for medical savings account contributions, health savings account contributions and Section 529 tuition account program contributions Pennsylvania -3.07% flat tax income tax on 8 classes of income: The Tax Foundation ranks Pennsylvanias 3.07% rate 8th lowest among states levying an individual income tax. Despite the low ranking Pennsylvania's state income tax collections per person were $1053 in 2012 which ranked 12th highest. 3. MISSISSIPPI INDIVIDUAL INCOME TAX o3% on the first $5,000 of taxable income. o4% on the next $5,000 of taxable income. o5% on all taxable income over $10,000. Deductions oMississippi allows citizens to use the same itemized deductions for state income tax purposes as used for federal income tax purposes with one exception: Mississippi Income Taxes are not deductible Mississippi - Graduated income tax rate : Exemptions oMississippi allows for certain exemptions based on filing status including the following: o Married filing joint - $12,000 o Married filing separate - $6,000 o Head of family - $8,000 The Tax Foundation ranks Mississippi's graduated income tax system 18th lowest among states levying an individual income tax. Mississippi's state income tax collections per person were $456 in 2012 which ranked 11th lowest nationally. 4. PENNSYLVANIA CORPORATE INCOME TAX 9.99% of all federal taxable income, without the federal net operating loss deduction, special deductions. Who Pays? Any entity classified as a corporation for federal income tax purposes is considered a corporation in Pennsylvania. Loopholes Two thirds of corporations doing business in the Pennsylvania pay no tax, in large part because of loopholes in the law. In 2013 SB 882 worked to close one loop hole requiring mandatory combined reporting for corporate entities, however, the bill did not pass. Pennsylvania -9.99% flat tax corporate income tax: The Tax Foundation ranks Pennsylvanias 2nd highest among states levying a corporate income tax. 5. MISSISSIPPI CORPORATE INCOME TAX Who Pays? All corporations doing business, earning income, or existing in Mississippi are required to file a corporate income tax return, even if the corporation is inactive or not engaged in business. Loopholes Mississippi looses an estimated $30 Million annually to corporations that do business in Mississippi can now pay royalties to a parent company in a state with no corporate income tax, allowing them avoid Mississippi taxes on that income. In 2012 House Bill 970 would have closed this loophole, the bill passed the Ways and Means Committee however died later that session. Mississippi - Graduated income tax rate : The Tax Foundation ranks Mississippi's graduated corporate income tax system 9th lowest among states levying a corporate income tax. o3% on the first $5,000 of taxable income. o4% on the next $5,000 of taxable income. o5% on all taxable income over $10,000. 6. PENNSYLVANIA SALES AND USE TAXES 6% is above the national median of 5.95%. The average local sales tax rate is an additional 1%. Exempted Items Food, most clothing, textbooks and pharmaceuticals are among the items most frequently exempted Affiliate Nexus Amazon Laws In December 2011 the Pennsylvania Department of Revenue issued Sales and Use Tax Bulletin 2011-01, that clarified what business activities constitute remote seller nexus and provided a deadline of February 1, 2012 for remote sellers with a nexus with Pennsylvania to register to collect sales tax. Pennsylvania levies a 6% general sales or use tax on consumers Pennsylvania's state and local governments collect $753 per person in general sales taxes. 7. MISSISSIPPI SALES AND USE TAXES 7% is above the national median of 5.95%. The average local sales tax rate is an additional 0%. Exempted Items Gasoline, agricultural products including pesticides, fertilizer, and livestock feed, sales made directly to the federal government, the state of Mississippi and counties and cities within Mississippi, sales made directly to non-profit and public schools in Mississippi Affiliate Nexus Amazon Laws In early 2011, the Mississippi legislature considered new legislation that would require larger out-of-state Internet retailers to collect and pay sales tax. However the proposed Mississippi law, HB 363, died in committee later that year. Mississippi levies a 7% general sales or use tax on consumers Mississippi's state and local governments collect $999 per person in general sales taxes. 8. PROPERTY TAXES The exact property tax levied depends on the county the property is located in. Pennsylvania Property Tax Collections Average Property taxes levied cannot exceed 30 mills. The median property tax in Pennsylvania is $2,223.00 per year for a home worth the median value of $164,700.00. Counties in Pennsylvania collect an average of 1.35% of a property's assessed fair market value as property tax per year. Mississippi Property Tax Collections - Low Mississippi has one of the lowest median property tax rates in the United States, with only three states collecting a lower median property tax than Mississippi. Single-family residential property is taxed at 10% of its assessed value. The median property tax in Mississippi is $508.00 per year for a home worth the median value of $98,000.00. Pennsylvania is ranked twenty-fifth out of the fifty states and Mississippi is ranked fourth in order of the lowest property taxes collected. 9. INTERESTING TAX LAWS- PENNSYLVANIA Iced vs Hot Tea When purchasing iced tea be sure it is rung up as iced tea and not a soft drink or hot tea. Why? Itll save you a couple cents in tax. Food from a Vending Machine Food is not subject to sales tax in Pennsylvania, however, if food is purchased from a compressed air vending machine apply 6% sales tax. Alcohol, Wine and Malt or Brewed Beverages Johnstown Tax Alcohol beverage sales at Pennsylvania liquor stores include a 18% sales tax called the Johnstown tax. Passed in 1936 to fund the rebuild of Johnstown, Pennsylvania after it was destroyed by two devastating floods. The tax still exists today and brings in over $200 M annually. 10. QUESTIONS 1. Are the states that build incentives into their tax policies, or do not tax personal income at all the ones that will thrive in the future? 2. If Pennsylvania lost $7B in adjusted gross income over between 1995 and 2010 do you believe it was completely tied to the economic downturn or did the income migrate to other states with less of a tax burden? 11. REFERENCES Brown, Travis H. How Money Walks: How $2 Trillion Moved between the States and Why It Matters. St, Lois: Pelopidas, LLC, 2013. Print. Mississippi Department of Revenue. Mississippi Department of Revenue, Mississippi Department of Information Technology Services, 2014. Web. . Pennsylvania Department of Revenue. Commonwealth of Pennsylvania., 2014. Web. . State Government Tax Collections: 2013. U.S. Census Bureau, 2014. Web. . "Tax-Rates.org The 2014 Tax Resource." Tax-Rates.org. Tax-Rates.org, 2014. Web. 23 Apr. 2014. .