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Tax Hike Wish-List Shrinks Before Vote

By Andrew Staub
for The Pennsylvania Independent

HARRISBURG PA – The great tax vote of 2015 should arrive today (Wednesday, Oct. 7, 2015), and it could have big ramifications for Pennsylvania’s three-month-long budget impasse.

Gov. Tom Wolf unveiled the latest version of his revenue plan Tuesday (Oct. 6), and though it scales back the scope of his original proposal, taxpayers would still get tagged with a 16- percent personal income tax increase. The natural gas industry would be subject to a severance tax for the first time, too.

The Republican-controlled state House could vote on Wolf’s tax package, worth $3.8 billion over the next two fiscal years, as soon as today. Striking it down would send a strong message that there’s no appetite for the type of broad-based tax increase the governor wants and set budget talks on a new course.

“If it fails, (Wolf) has to realize that this is not what the state of Pennsylvania wants. There’s no gamesmanship, there’s no spinning,” said Anna McCauslin, director of policy for the Pennsylvania chapter of Americans for Prosperity. It’s a conservative organization that supports lower taxes and limited government.

Wolf’s latest proposal centers on two taxes, the personal income tax and the severance tax. The sales tax, which the governor originally wanted to raise and expand, is off the table. So are higher tobacco taxes and an increased bank shares tax.

It would still bring in gobs of money. The administration expects the proposal would raise more than $1.4 billion in 2015-16 and top $2.4 billion in 2016-17.

Wolf submitted his revised tax proposal a day after he renewed a pitch for a broad-based tax increase, saying it is necessary to close a structural deficit that could reach almost $2.3 billion by the next fiscal year. Without one, Wolf warned the state would be forced to cut education funding to its lowest level in about a decade.

“Pennsylvania needs critical revenue to fix our structural budget deficit without gimmicks,” Wolf said in a statement. “We need to make sure oil and gas companies pay their fair share so we can restore the drastic cuts made to education, and seniors and disabled households desperately need relief from skyrocketing property taxes that resulted from underfunding education.”

Under the plan, the state’s personal income tax would jump from 3.07 percent to 3.50 percent. A special tax forgiveness program would be expanded so a family of four earning $36,400 and a family of six earning $55,400 would pay no state income tax.

The administration also included targeted property tax relief. According to an outline of the proposal, the plan would eliminate the onerous tax for 216,344 new seniors and 30,915 more disabled households.

Wolf would stack a severance tax on top of the existing local impact fee that drillers pay. It would stand at 3.5 percent, plus 4.7 cents per every thousand cubic feet. It faces fierce opposition from several business groups.

To Republicans, Wolf’s retreat from other proposed tax increases constituted an admission he does not have the legislative backing to raise levies to the level he originally anticipated.

However, House Majority Leader Dave Reed of Indiana County said the administration has remained adamant it has the necessary votes for passage. Wolf needs all 84 House Democrats and 18 Republicans to do it, but Reed said GOP members are not clamoring to vote for a broad-based tax increase.

Even with some property tax relief attached to the latest proposal, Wolf could still struggle to whip up enough votes.

“We have been telling him from the beginning the personal income tax for anything other than dollar-for-dollar property tax relief or elimination is a problem, and the votes are just simply not there for that,” Reed said. “If this is the only way to see who is better at counting votes, I guess this is the only way to do it.”

Wolf’s press secretary, Jeff Sheridan, said the administration has not communicated anything regarding vote totals to the Legislature.

“The only thing we have indicated is that we are working to garner support,” Sheridan said, characterizing Reed’s comments as more “political posturing.”

Wolf and Republicans who control the Legislature have been locked in a three-month budget impasse ever since the governor vetoed a $30 billion GOP spending plan in June. He also vetoed a stopgap budget, a pension reform bill and legislation that would have privatized the state-owned liquor stores.

Suffice it to say, the relationship between the administration and the Legislature isn’t exactly amorous, even though Republicans offered Wolf more education funding and he offered another version of pension reform and lease of the liquor system.

“Each side has made compromises, and the other side seems to not recognize that the other side has put a compromise on the table,” said G. Terry Madonna, a political science professor and pollster at Franklin & Marshall College. “It’s like they’re talking past each other.”

While the upcoming tax vote could fuel more acrimony, the governor hopes partisan leanings will dissipate just long enough for lawmakers to cast a “once-in-a-generation vote.”

“You don’t want to be on the wrong side of history here,” Wolf said.

Political life will be harder for whoever ends up on the wrong side of the tax vote.

Whoever wins this year’s budget battle will hold an advantage over the duration of Wolf’s first term, McCauslin said. She doesn’t know who will blink first.

“It’s a game of chicken with the taxpayers’ money, isn’t it?” she said.

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