Business Taxes

When the layers of Governor Tom Wolf’s latest budget proposal are peeled away during the legislative budget hearings that begin next week, Pennsylvanians will see a rogues gallery of job-killing tax increases from across the decades – some defeated, some repealed – back to haunt our economy.

The General Assembly and Governor Tom Wolf are still working towards a budget agreement, which, as of this writing, will likely be finalized in the weeks following the June 30 deadline. While no one facing re-election wants to repeat last year’s bruising nine-month budget battle, the kind words exchanged about this year’s budget talks have failed to produce a balanced spending plan for 2016-2017.

Disagreements over revenue – how much is needed and how to raise it – interrupted the process just before the July 4 weekend, but now must be resolved.

Spending restraint and opposition to tax hikes by Republican lawmakers over the past five years have likely kept Pennsylvania from entering a fiscal death spiral. A new study by the Mercatus Center at George Mason University, which compares solvency and other fiscal health indicators among the states and Puerto Rico, places Pennsylvania near the bottom, floundering with the high tax and spend states of New York, California and Maryland. More spending and taxes over the past five years would have surely moved us closer to Puerto Rico’s bankrupt nightmare.

On Tuesday, Governor Tom Wolf brazenly scolded House and Senate Republican lawmakers instead of presenting a budget proposal to an equal branch of government. The budget fiasco now consuming Harrisburg, he said, is the result of Republicans playing politics and ignoring the math. He then went on a political tirade, saying throughout the address that lawmakers were risking the welfare, and even the lives, of the elderly and children.

The problem? He’s the one whose math is wrong.

For all practical purposes, the General Fund budget signed in part by Governor Wolf in late December was the same one he vetoed in early July. At the time of the signing, he didn’t indulge the press to answer the most obvious question: why sign it now but not then? Surely, he could have saved a lot of people a lot of grief, and the taxpayers a lot of money. Instead of taking questions, he chastised the legislative leaders, calling the budget “garbage” and “an exercise in stupidity” and then left. The tragedy is that all this was completely unnecessary.

Under current Pennsylvania law, it is solely the responsibility of the Department of Community and Economic Development (DCED) to release Educational Improvement Tax Credits (EITC) and the Opportunity Scholarship Tax Credits (OSTC) to the approved business applicants. The Commonwealth of Pennsylvania is currently withholding $150 million in credits, threatening the future of schools and programs that serve our most vulnerable student populations.

Legislative sources say that the next move to break Governor Wolf’s budget shutdown, now in its 16 week, will be to give the governor a piece of his original state spending plan: a higher sales tax in exchange for a reduction in local property taxes, while remaining firm on other key items. The plan amounts to a dollar-for-dollar sales tax and property tax exchange. It would come with one major provision; that future local tax increases would have to be approved through referendum.