Pennsylvania's Independent Fiscal Office predicts that extra money for residents will mean a boost for the state economy.
With more cash in their pockets, consumers are likely to spend more. That spending, in turn, raises more sales tax for the state, said Matthew Knittel, director of the Independent Fiscal Office in Harrisburg. Companies have also received tax cuts, leading to increases in dividends and capital gains, he said.
"We are expecting a short-term boost of economic growth in the next year or two," Knittel said. "Long term, it's less clear whether it will boost economic growth, and one of the concerns is that the higher federal debt will drive up interest rates."
Disposable income in Pennsylvania could increase by at least $7 billion in the fiscal year that begins in July, Knittel's office said, citing other reports. Sales tax revenue could increase by between $10 million and $20 million in the current fiscal year, according to the Independent Fiscal Office, and by between $60 million and $80 million in fiscal year 2018-2019.
Are more changes coming?
The payroll changes going into effect this month may not be the last change of the year. IRS officials said they are revising the W-4 form, which employees fill out to claim deductions and give employers guidance on how much to withhold from their pay.
Jacobsohn, of the American Payroll Association, said a big change to the form could require new computer software for employees. That could take months to implement she said.
"(If) you filled out a W-4 20 years ago and maybe you didn't change it because your situation hasn't changed ... explaining to that employee to get them to understand that they have to fill out a W-4 and what they need to do, that kind of outreach takes time as well," she said. "It's really just a timing issue of getting it all done within the deadlines."
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