2 Tax Credits Emerge From PA Budget Crisis

A pair of new tax credits are part of the new Pennsylvania budget that was recently passed after a lengthy impasse left the state's future hanging in the balance for months past the deadline.

Democrats have presented the tax credits, which provide rebates both to low income residents and to affordable housing projects, as wins out of the negotiations.

However, one of the credits in particular has drawn significant scorn from both sides of the aisle as being ineffective, even questioned by some as potential "satire."

Meanwhile, Republicans are celebrating significant victories out of the budget impasse, most notably in Pennsylvania's withdrawal from the Regional Greenhouse Gas Initiative, an 11-state agreement to limit carbon dioxide emissions from the power sector.

Following the budget crisis and the tax credits negotiated as part of the compromise, Pennsylvania is now the only state in the entire northeast and mid-Atlantic to not be a part of the climate agreement, widely seen as a moderate and bipartisan effort.

“We are deeply disappointed that Governor Shapiro accepted this bad deal from Senate Republicans," Lena Moffitt, the executive director of climate nonprofit Evergreen Action, said in a statement. "Walking away from it abandons the workers, communities, and industries that were ready to build a cleaner, cheaper energy system...(Gov. Shapiro) caved to Republican obstruction, and now Pennsylvania families will pay the price."

Here's a glance at the two credits that came out of the budget impasse.

Working Pennsylvanians Tax Credit

The Working Pennsylvanians Tax Credit, modeled on the federal earned income tax credit, will impact an estimated 940,000 low to moderate income Pennsylvania residents.

Any resident who qualifies for the federal Earned Income Tax Credit will now also qualify for the new state plan. Residents can get up to 10 percent of the federal credit back.

However, it's been pilloried by many who find the actual sums, and the actual conditions which recipients need to fulfill, to be absurd.

The notion of states providing an extra tax credit to lower income residents is not new, nor is it generally promoted as a game-changer. In fact, 31 other states already had a similar program in place by the time Pennsylvania's program was passed into law.

In a post on X promoting the plan as an impactful measure in a state wracked by income inequality and steadily rising costs, Shapiro described how "a grandmom who makes minimum wage and raises her grandchild (alone) could get $433 back."

That perspective was out of touch enough that responders seemed to question if the plan was satirical.

"Lol oh wow... less than $1k?! That's so amazing," one user posted, while another added "$433 for a grandmother raising a grandchild is a slap in the face amount."

Affordable Housing Tax Credit

While the Affordable Housing Tax Credit has already existed for years in Pennsylvania, the budget contains amendments to the way it works, and ultimately expands the reach of the program.

Previously, the credit had been awarded to projects considered to have the best chance at financially succeeding, instead of the projects that would be the most impactful on the ground or that were in communities in the most dire need.

Under the new changes in 2025, investors will bid on the tax credits, not the actual project. The Pennsylvania Housing Finance Authority will then receive the tax revenue from those projects and use that funding to provide grants to specific projects, ostensibly the ones in most dire need.

See the full 2025-26 budget online here.