What SB 206 and HB 1742 Actually Propose
Income tax makes Pennsylvania uncompetitive. While states like Tennessee, Florida, and Texas gain residents, income-tax states lose population. According to the Population Reference Bureau, Pennsylvania’s population growth from July 2024 to June 2025 was only 0.1%, compared to Florida (0.9%), Tennessee (1.0%), and Texas (1.2%) who are all states without income tax.
While some population decline relates to lower birth rates, this doesn’t explain why no-income-tax states consistently grow faster. The migration pattern is clear that people and businesses are making calculated moves to states where they keep more of their earnings.
Pennsylvania’s income tax creates a competitive disadvantage that hurts our budget. I propose eliminating the state income tax and increasing and expanding sales tax, following the successful models of Florida and Texas. Their strong fiscal performance proves states can thrive without income tax while maintaining robust growth.
Pennsylvania’s 3.07% Income Tax Is Already Costing the State Residents and Businesses
Pennsylvania workers lose 3.07% of their income every paycheck to state income tax, while Florida workers keep 100% of their earnings. Despite having no personal income tax, Florida, Texas, Tennessee, and six other states still balance their budgets each year and fund their governments effectively. This raises an obvious question: why wouldn’t workers want to keep all their income and move to a better-managed state?
If Pennsylvania continues its current path, we can safely assume headquarters, population, and businesses will continue to leave. I propose that Pennsylvania eliminate income tax and adopt the revenue model of Florida, Texas, and Tennessee through an expanded sales tax. This would help Pennsylvania avoid the fate of high-tax states like California, remain competitive in America’s economic landscape, and increase both population and business growth.
The Competitive Disadvantage: How Income Tax Hurts Pennsylvania
Punishing work through income tax doesn’t allow workers choice in how they’re taxed. A flat percentage comes out of every paycheck automatically, regardless of financial circumstances. Sales tax, by contrast, allows workers to control their tax burden through spending decisions. Moving from income tax to sales tax returns financial responsibility and control to workers over their own earnings.
The competitive advantage of no-income-tax states is measurable. CBRE reports that from 2018 to 2024, New York City lost 27 corporate headquarters while Nashville gained 37. Remote workers can live anywhere while working for Pennsylvania companies, and many choose Tennessee over Pennsylvania to avoid income tax. Migration patterns between 2022 and 2023 reveal a significant shift in the national tax base; while California lost $23.8 billion in taxable income, Florida saw an influx of $39.2 billion primarily from households relocating from New York, New Jersey, and California (Internal Revenue Service, 2024). This movement highlights a clear trend of wealth migration toward states with no personal income tax.
No-income-tax states experienced a significant population influx over the past few years, magnified when higher-tax states became unaffordable. From this period until today, Pennsylvania’s population growth has dwindled to only 0.1%. This is not a coincidence; it is a direct result of workers and businesses having no compelling reason to move to Pennsylvania when they can pay lower taxes elsewhere.
Florida, Texas, and Tennessee Prove the Sales-Tax-Only Model Works
The fiscal performance of no-income-tax states proves the model works. The data below compares Pennsylvania to three states that have successfully replaced income tax with a consumption-based model (see Appendix).
Table A: Per-Capita Comparison (FY 2025)
This comparison reveals that Pennsylvania has significant untapped sales tax capacity. Pennsylvania currently collects only $1,103 per capita in sales tax, compared to Tennessee’s $2,048. This disparity isn’t due to a smaller economy; it’s due to Pennsylvania’s narrow tax base (see Appendix, Pennsylvania Financial Report FY2025) and numerous exemptions.
Florida and Texas have proven that the sales-tax-only model works effectively at different scales, from large to very large populations. Tennessee, serving roughly half of Pennsylvania’s population, shows the model works efficiently at a mid-sized scale as well. The competitive consequences are clear that Pennsylvania is being left behind.
Even New Hampshire Saw the Writing on the Wall
The trend is accelerating. Even New Hampshire removed the personal income tax and eliminated its remaining 5% tax on interest and dividend income on January 1, 2025. If New Hampshire decided that even a narrow income tax was a competitive disadvantage, Pennsylvania’s broad-based 3.07% tax is indefensible.
Addressing the Critics: Is a Sales Tax Regressive?
Critics often argue that shifting to a sales tax is regressive and will disproportionately harm the working class and the poor. While this is a valid concern, it overlooks the fact that Pennsylvania’s current income tax already places a significant burden on these groups. Unlike a sales tax, which is based on consumption choices, the 3.07% income tax is an automatic, non-negotiable deduction from every paycheck. To mitigate the impact on vulnerable populations, Pennsylvania can and should continue to exempt essential goods such as groceries and prescription medications from sales tax. By doing so, the state can offer immediate financial relief to all workers and retired seniors by eliminating taxes on their income. This is a benefit that for many will outweigh the marginal increase in taxes on discretionary spending.
But Doesn’t Florida Rely on Tourism? Pennsylvania Has the Consumer Spending Base to Make It Happen
Another common concern is that Pennsylvania would not generate sufficient revenue from sales tax alone to cover its liabilities and fund essential services. This concern is unfounded, as proven by the fiscal data (See Appendix) from Florida, Texas, and Tennessee.
Table B: Market Comparison by State Per Capita Spending on Goods (2024)
Critics often argue that no-income-tax states like Florida and Tennessee rely on tourism to bridge their revenue gaps, a luxury Pennsylvania supposedly lacks. However, Bureau of Economic Analysis (BEA) data on Personal Consumption Expenditures (PCE) reveals that in 2024, the average Pennsylvania resident spent $18,763 on goods which is nearly identical to a Florida resident ($19,200) and higher than a Texas resident ($18,447) (see Table B). This evidence confirms that the massive sales tax revenue in no-income-tax states is fueled by the consistent, daily consumption of their permanent populations, not just vacationers. Pennsylvania’s revenue gap is therefore not a result of fewer tourists, but a failure to capture the existing $18,700+ per capita that its 13 million residents are already spending.
The Case for Passing SB 206 — Pennsylvania Can’t Afford to Wait
The data shows Pennsylvania is losing competition for residents and businesses due to its outdated income tax. The financial success of Florida, Texas, and Tennessee proves that a sales-tax-only model is superior for generating revenue and driving population growth. Pennsylvania must modernize its tax code by eliminating the income tax and expanding its sales tax base to attract investment and talent. The question is not whether Pennsylvania can afford to make this change, but whether it can afford not to.
Works Cited
Bureau of Economic Analysis. “Personal Consumption Expenditures by State, 2024.” U.S. Department of Commerce, 2024, www.bea.gov/data/consumer-spending/state. Accessed 6 Apr. 2026.
CBRE. “The Shifting Landscape of Headquarters Relocations: 2025 Update.” Business Insights, 2025.
Commonwealth of Pennsylvania. Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2025. 2025.
Commonwealth of Pennsylvania, Department of Revenue. Tax Rates.
Internal Revenue Service. “SOI Tax Stats: Migration Data 2022–2023.” U.S. Department of the Treasury, 2024, www.irs.gov/statistics/soi-tax-stats-migration-data. Accessed 6 Apr. 2026.
Population Reference Bureau. “State Population Estimates and Components of Change: 2024-2025.” PRB, 2025, www.prb.org.
State of Florida, Department of Financial Services. Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2025. 2025.
State of Tennessee, Department of Finance. Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2025. 2025, www.tn.gov/content/dam/tn/finance/acfr/archive/ACFR%20-%20FY25.pdf.
State of Texas. Annual Comprehensive Financial Report for the Fiscal Year Ended August 31, 2025. 2025.
Tennessee Department of Revenue. Tennessee Sales Tax Guide for Businesses.
Appendix
Appendix A: Pennsylvania Financial Report Fiscal Year Ending June 30, 2025
Appendix B: Florida Financial Report Fiscal Year Ending June 30, 2025
Appendix C: Texas Financial Report Fiscal Year Ending June 30, 2025
Appendix D: Tennessee Financial Report Fiscal Year Ending June 30, 2025
Appendix E: 2024 Per Capita Personal Consumption Expenditures (PCE)
