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$5 Billion State Tax Plan Heads To Showdown

By Andrew Staub
for The Pennsylvania Independent

HARRISBURG PA – Another state budget showdown looms this week, and one conservative group has already warned Republican lawmakers it will monitor any votes on new or higher taxes.

Republican leadership has agreed to allow Democratic Gov. Tom Wolf’s revenue plan to go to a vote Wednesday in the state House, with hopes it will fail and stymie the governor’s quest for a suite of tax increases that would total $5 billion over two years.

That has sent Wolf on the lobbying trail to whip up votes. It’s also incited the Citizens Alliance of Pennsylvania, which supports conservative candidates, to issue a bulletin to Republicans. CAP will keep a close eye on the votes – including amendments – and score support for individual taxes negatively, Executive Director Leo Knepper said.

“Any Republicans who vote in favor of the governor’s tax proposal in whole or part will receive special attention from CAP and CAP PAC in terms of our candidate recruitment efforts for the 2016 primary,” he said in a statement.

Convincing enough fiscally conservative Republicans in both the House and Senate to support the broad-based tax plan is a long shot for Wolf, but the fact that GOP leadership is allowing the revenue plan to go to a vote at least gives the governor a chance to pull an upset.

Some Republicans, mainly in southeastern Pennsylvania, support a severance tax, meaning at least part of the governor’s plan could have bipartisan support.

On the other hand, Wednesday’s vote could simply play out in the usual partisan fashion, helping to write another rocky chapter in Pennsylvania’s ongoing budget soap opera.

Pennsylvania has been without a budget for more than three months, since Wolf swiftly vetoed the $30 billion GOP spending plan that reached his desk in June. That measure held the line on taxes, but did not include a host of Wolf’s priorities, including his preferred level of education funding, property tax relief and a severance tax on the natural gas industry.

Wolf will introduce his tax package sometime today (Tuesday, Oct. 6, 2015), so it’s still not entirely clear what will be included. Republicans have circulated an outline of a Democratic plan that features the severance tax, an increase in the earned income tax rate, an expansion of the state’s sales tax, a higher bank shares tax and greater levies on tobacco products.

If the proposal that arrives is vastly different, Republicans will have to take some time to reassess it, said Steve Miskin, a spokesman for the House GOP caucus.

Calling this week’s House consideration a “once-in-a-generation vote,” Wolf started the week with a presentation that focused on the math of the budget situation. A pattern of using one-time revenue streams, such as changing the unclaimed property law to snare a greater chunk of revenue in the last budget, and funding shifts to plug holes has left the state with a structural deficit that could reach almost $2.3 billion in the next fiscal year, he said.

“The math has to work,” he said. “Two plus two does equal four in the real world. It has to equal four here in budgeting in Harrisburg.”

Without recurring revenues – read as broad-based tax increases – the state would have to spend less on social programs and bear additional credit downgrades, Wolf said. Property taxes would likely rise, and Pennsylvania could be forced to make cuts that would put education funding at its lowest level in about 10 years, the governor added.

“Doing nothing now is going to result in a huge cut for education. I think that probably is the key element here,” he said. “And if people didn’t like what they saw four or five years ago, they’re going to hate next year because we simply have come to the end of the line using these one-time fixes.”

The Commonwealth Foundation, a free-market think tank, has rendered its own analysis that found the latest iteration of Wolf’s plan would cost a family of four an additional $1,000 a year in taxes.

“Wolf’s latest plan remains a lose-lose for taxpayers, working families, and job seekers, who will see significantly higher tax bills and fewer job opportunities,” commented Nathan Benefield, vice president of policy analysis for the Commonwealth Foundation.

Republican leadership scheduled Wednesday’s vote last week, a day after Wolf vetoed an $11 billion stopgap budget that would have provided four months of funding. It also would have allocated a full year’s worth of federal funds.

GOP lawmakers have painted the budget impasse as resulting from Wolf’s insistence on tax increases that lack enough legislative support. House Majority Leader Dave Reed of Indiana County recently said “it is long past time to negotiate a budget based in reality.”

“The only thing standing between the governor and the $5 billion tax increase his budget requires is the simple fact that there are not 102 Republican or Democratic votes in the House for it to pass,” Reed said in a statement. “The sooner the governor accepts this fact, the sooner we can actually get a budget done.”

Wolf said he’ll keep pressing for his policies if lawmakers defeat his proposal and don’t provide an alternative acceptable to him. At a minimum, the budget must close the structural deficit, Wolf said, indicating he also wants to tack on more of his priorities after that.

“I think if I lose on Wednesday, Pennsylvania loses,” Wolf said.

Photo from Google Images

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