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AUGUST 27, 2010 | Commentary by NATHAN BENEFIELD
Gov. Rendell's Gamesmanship
While table games have been in Pennsylvania casinos for more than a month, I don't know if Gov. Rendell has tried his luck. But it would be a safe wager that he's a fantastic poker player. Why? For eight years, he's been able to bluff, bully, and stare down anyone who opposes his tax-borrow-and-spend agenda.
JULY 27, 2010 | Commentary by MATTHEW BROUILLETTE
Can Tom Corbett Keep His "No Tax" Pledge?
Attorney General Tom Corbett has taken significant criticism for his pledge to not raise taxes if elected governor. That was to be expected from his Democrat rival, Allegheny County executive Dan Onorato, who hasn't ruled out raising taxes to fill a budget gap expected to be as high as $5 billion next year. But it's the friendly
JULY 13, 2010 | Commentary by NATHAN BENEFIELD
The Real Problem with the Specter Library
As part of the state budget deal, Gov. Rendell secured $600 million in new borrowing for pork-barrel projects, including $10 million for the "Arlen Specter Library" at Philadelphia University and another $10 million for the "John P. Murtha Center for Public Policy." These monuments to politicians have sparked outrage, but represen
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AUGUST 26, 2010
Why Lawmakers Don't (And Shouldn't) Raise Taxes
Terry Madonna and Michael Young have a new column asking why Pennsylvania lawmakers are so loath to raise taxes:
This response differs dramatically from past practice. Throughout most of the 20th century, despite partisan differences, governors and legislatures raised taxes to balance state budgets during recessions. In just the last 25 years, for example, state leaders raised the income tax three times - 1983, 1991, and 2003 - to meet budget shortfalls. Indeed, the pattern of raising taxes to combat recessionary deficits was almost Pavlovian in its predictability.
But not this year! Despite perhaps the worst revenue shortfall in Pennsylvania's history, a tax increase is simply not in the cards.
The obvious question: What is different now?
Let me offer some quick answers to this question.
For starters, Pennsylvania's state and local tax burden is significantly higher today than it was in prior years. And while the 1983 income tax raise resulted in a lower rate a few years later, the 1991 and 2003 tax hikes have resulted in a PIT rate that is 46% higher than in 1990.
| Pennsylvania Tax Rates and Burdens Before Tax Hikes | |||
| Year | PIT Rate | State and Local Tax Burden | Tax Burden Rank |
| 1982 | 2.20% | 9.5% | 16 |
| 1990 | 2.10% | 9.8% | 24 |
| 2002 | 2.80% | 9.6% | 16 |
| 2009 | 3.07% | 10.2% | 11 |
| Sources: Tax Foundation, PA Department of Revenue | |||
Maybe lawmakers realize you can't just keep raising taxes indefinitely.
A second hypothesis is that lawmakers have seen the effect of these higher taxes. That is, Pennsylvania's growing tax burden resulted in stagnant economic growth. From 1991 to 2009, Pennsylvania ranks 42nd in job growth, 48th in personal income growth, and 47th in population growth among the 50 states.
A final possibility is that lawmakers recognize that our budget deficit is caused not by taxing too little, but by overspending. As Matt Mitchell of the Mercatus Center points out in a recent policy report, spending restraint by states is an untested policy. In fact, nearly every state with a budget deficit would have a surplus if they had merely grown spending to the rate of inflation plus population growth.
This is true in Pennsylvania -- even going back just to the start of the Rendell Administration. By growing the General Fund Budget from $20 billion to $28 billion, Gov. Rendell produced a 40% increase in spending, almost double the rate of inflation.
posted by NATHAN BENEFIELD | 10:18 AM | 0 comment
AUGUST 18, 2010
"Across the Board" Budget Cuts are Lazy Policy
Gov. Rendell announced that to balance the Pennsylvania state budget -- after getting $250 million less from Congress than predicted -- he would be ordering cuts of 1.9% "across-the-board," from all departments. He also said about 100 state workers would be laid off, a slight decrease from his earlier prediction of 20,000.
Across the board cuts are good politics, but lazy public policy. State lawmakers need to prioritize spending and eliminate areas that aren’t core functions of government.
For example, a number of House Republicans sent a letter to the Governor demanding the elimination of $100 million in pork-barrel programs often called WAMs. Many of these line items had been eliminated in 2009, but were thrown back in this year, without warning.
Philadelphia Daily News columnist John Baer likes the idea of cutting WAMs, and cites bi-partisan support for it, and some other areas:
Any WAMs, says Rep. Gene DePasquale, D-York, "should be first to go . . . clearly before cuts to health care, education or environmental protection."
Rep. Bryan Lentz, D-Delco, calls cutting WAMs "a good suggestion."
Rep. John Yudichak, D-Luzerne County, says the Legislature "has to put more on the table," including long-hoarded leadership accounts, which he figures at about $200 million and calls "a padded reserve to buttress leaders."
And Philly Democratic Sen. Mike Stack says the state can rake in $100 million by legalizing small games of chance.
Hey, why not? We legalized large games of chance.
So, just like that - with WAMs, slush funds and video poker - we're at roughly $400 million, and that's without savings from salary/perk/pension cuts.
It's just too bad that none of these suggestions come from legislative leaders.
posted by NATHAN BENEFIELD | 06:09 PM | 0 comment
AUGUST 17, 2010
State Budget Gaps and State Budget Growth
In a recent report, Matthew Mitchell from the Mercatus Center provides solutions to the "rock and hard place" situations states are finding themselves in while they try to reconcile state budget deficits.
The study looked at each state's policies and approaches that lead to each state's budget predicament. The patterns that emerged provide lawmakers an idea what not to do:
- State governments that spent a larger fraction of state income - and had done so for many decades - experienced smaller percentage budget gaps in FY 2010. That is, states that historically spent more per person had lower budget shortfalls, perhaps due to the fact that their tax systems supported over-spending, contrasted with states that recently increased spending during boom times.
- States whose per capita spending levels increased the most over the last two decades had larger percentage budget gaps in FY2010.
- States whose policies permit economic freedom (lower taxation and less regulation) and states with strict balanced budget requirements experienced smaller budget gaps.
Pennsylvania was rated among the states with "weak balance budget requirements" because it allows the deficit to carry over to the next year. States with strict balanced budget requirements had budget deficits 8% to 10% less than the average state.
Based on the report's findings, Pennsylvania can decrease its budget gap by ending deficit rollovers, lowering taxes, reducing regulations, and restraining spending growth.
posted by KATRINA CURRIE | 10:14 AM | 0 comment
