Pennsylvania State Budget
Throughout this state budget debate, Gov. Wolf has touted his natural gas severance tax to fund education. And some reporters refer to the severance tax as the "cornerstone" or "centerpiece" of his plan.
Except it isn't. The severance tax makes up a slim portion of Gov. Wolf’s proposed tax increases. In fact, his plan to tax health care and day care would raise more revenue than slapping an additional tax on the natural gas industry.
He never talks about his sales tax proposals—probably because they are so unpopular. His entire tax plan couldn't garner one single vote in the House. It failed 0-193. Yet, he hasn't said whether he is still demanding a $4.6 billion tax increase.
Even if Gov. Wolf has dropped the majority of his massive tax hikes, that’s no reason to accept a new severance tax. As Dawn pointed out yesterday, the severance tax is bad for all energy consumers, no matter your income level.
Proponents of a new natural gas tax—which would be in addition to the existing impact fee (tax) and other taxes extractors already pay—ignore the consequences new taxes will have on working people.
In contrast, the Independent Fiscal Office's analysis of Gov. Wolf's severance tax proposal finds Pennsylvania families and businesses will pay the tax through higher energy prices. Even though 80 percent of the tax will be borne by consumers in other states, Pennsylvania residents will still shoulder a significant burden.
Households earning less than $100,000 will pay $180 million more annually in higher utility bills as a result of Gov. Wolf's proposal.
|Tax Incidence for Pennsylvania Residents, FY 2018-19|
|Net tax increase by household income under Wolf proposed budget, in millions|
|Under $25,000||$25,000-$49,999||$50,000-$74,999||$75,000-$99,999||$100,000-$250,000||More than $250,000||Total, Households less than $100,000|
|Sales and Use||$367||$616||$606||$512||$1,283||$721||$2,101|
|Corporate Net Income||($25)||($45)||($41)||($35)||($87)||($75)||($146)|
|Net Severance tax||$44||$56||$47||$34||$60||$23||$181|
|Source: Independent Fiscal Office: http://www.ifo.state.pa.us/resources/PDF/Revenue_Proposal_Analysis_April2015.pdf|
If enacted, Gov. Wolf's proposed tax would be the highest effective rate in the country.
Further, as I pointed out in recent testimony, the tax would hinder job creation and economic growth. Using the STAMP model developed by the Beacon Hill Institute at Suffolk University, we found the proposed severance tax, with no other tax changes, would result in 4,138 fewer private sector jobs in fiscal year 2017.
Encacting a severance tax won't result in free money from pots of gold found at the end of rainbows—it will be paid for by families through higher energy bills and by residents in the form of fewer job opportunities.
How out of whack is Gov. Tom Wolf's proposed $4.6 billion tax increase? Pretty far out there compared with the rest of the nation, according to a new report from the National Association of State Budget Officers.
Governors in 16 states proposed net tax and fee increases, while governors in 12 states proposed net decreases in fiscal 2016, resulting in an aggregate net increase of $3.0 billion. For the most part, increases were proposed for general sales taxes and cigarette taxes – ten states recommended a sales tax increase and nine states recommended increased taxes on cigarettes and tobacco products. Meanwhile, a dozen states proposed decreases for personal income taxes. Pennsylvania was the largest driver of the net increase, recommending $4.6 billion in tax and fee increases for fiscal 2016, followed by Connecticut and Alabama.
Not only was Pennsylvania a "driver" of state tax increases, Gov. Wolf's proposed tax increase is greater than the total for the rest of the country—which is a net tax decrease. In fact, Gov. Wolf's proposed increase of $4.6 billion is 8 times the next highest (Connecticut).
The chart below shows NASBO's compilation of net tax increases for fiscal year 2016, and Pennsylvania stands out like Shaquille O'Neal at a preschool.
On Wednesday, I testified before the Senate Finance Committee on the effects of Gov. Wolf's proposed tax increases. My testimony covered four key areas.
1) Wolf's plan represents more of the "same old, same old."
Total state spending is already at an all-time high, and has gone up 44 of the past 45 years—a $16,000 increase per family of four in inflation adjusted dollars.
Pennsylvania's tax burden currently ranks 10th highest in the nation, up from 25th in 1991. As a result, Pennsylvania has lagged the nation in job and income growth.
2) Wolf's plan hurts middle class families.
Gov. Wolf's tax increase represents a net increase of $1,400 per family of four. An Independent Fiscal Office analysis found that taxpayers in every single income group would pay more.
Moreover, families with certain expenses—such as day care or nursing care costs—would be hit far harder than the average family, with hundreds or thousands of dollars in additional costs.
3) Wolf's plan will cost Pennsylvania jobs.
Our analysis finds Wolf's tax proposal would result in 40,000 fewer private sector jobs in Pennsylvania by 2016-17.
4) We can balance the budget without raising taxes
Commonwealth Foundation has outlined several solutions to slow spending growth and prioritize state spending.
You can watch my testimony below, or read the full testimony here.
Despite Gov. Wolf campaigning on giving the middle-class a tax cut, his budget plan will raise taxes for every income group.
Disapproval of his tax plan was made apparent after Pennsylvania's House of Representatives put it up for a vote and not a single lawmaker voted in support of it.
CF’s President & CEO Matt Brouillette spoke with WPHT's Dom Giordano about Gov. Wolf's budget proposal and how it will harm all Pennsylvanians.
Matt states that "the average family of four would see an additional $1,400 come out of their family budget…[t]his isn’t going to be good for Pennsylvanians and I think that’s why nobody stood up voting for Governor Wolf’s tax proposals."
Gov. Wolf's broken promise will decrease the standard of living for all Pennsylvanians by taking more dollars out of every family’s wallet—leaving them with less money to buy groceries, pay for medical needs, or put gas in their car.
Click here or listen below to hear more.
The Dom Giordano Show airs daily on WPHT in Philadelphia.
At the same time Gov. Wolf is claiming his budget proposal will bring a net tax reduction, an Independent Fiscal Office (IFO) study reveals his proposal would actually inflict higher taxes upon workers in every income group.
With such conflicting reports, who should you believe?
James Paul, a CF senior policy analyst, recently spoke with WSBA’s Gary Sutton about how Gov. Wolf’s budget proposal actually hurts middle class families, rather than relieving them–as he claimed it would.
James states Gov. Wolf’s plan to increase state revenue by increasing taxes and expanding the items subject to the sales tax–everything from “the cradle to the grave”–makes taxpayers shoulder a heavier burden with no relief in sight. He outlines a more taxpayer-friendly strategy by stating legislators should “restrain spending…hold the line on taxes, and bring the budget into balance that way."
Click here or listen below to hear more.
The Gary Sutton Show airs daily on WSBA 910AM in the York area.
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Yesterday, the Pennsylvania House of Representatives voted on Gov. Tom Wolf's proposed tax increase—the largest in Pennsylvania's history.
The tax proposal failed by a 0-193 vote. That's right, not a single state lawmaker voted in support of Governor Wolf's tax plan.
Why not? Here's a quick refresher:
- Wolf's proposed tax increase hits middle-class families with net annual tax increase of $1,400 per family of four.
- Wolf's cradle-to-the-grave tax increase would hurt college students (taxing books and fees), young families (taxing diapers and day care), senior citizens (taxing nursing home care and home health care), and the bereaved (taxing funeral services). In total, Wolf proposes 45 categories to be taxed under the sales tax.
- Only 30 cents from every dollar in new state taxes would be directed toward property tax relief.
- The Independent Fiscal Office finds that every income group would pay higher taxes under Wolf's plan.
- Wolf's tax plan would result in almost 40,000 fewer private sector jobs once fully implemented.
Gov. Wolf has already began calling the unanimous rejection of his tax proposal a stunt. Yet until yesterday, his administration had been insisting that lawmakers take up his proposal in its entirety, as a take it or leave it proposition.
How much of the budget that you introduced do you hope to see as an end product?
All of it.
It actually is a holistic program. It's not meant to be cherry-picked.
And here is Budget Secretary Randy Albright:
"Without any hesitation I can say to you that the tax plan that we have put forward ... is the tax plan we need to put in place now to strategically go out and address the multiple challenges that we face as a Commonwealth,"
Wolf Chief of Staff Katie McGinty echoes the same refrain:
“This package as a whole proposes the biggest tax relief for both individuals and businesses in a couple of generations,” Katie McGinty said. “It is absolutely an urgent package for where Pennsylvania finds itself.”
And Jeff Sheridan, Wolf's spokesman, repeated this take it or leave it rhetoric:
Sheridan, Wolf's spokesman, said the governor will fight for his whole budget. "You can't look at this as separate pieces," Sheridan said.
Gov. Wolf got what we wanted—the House did consider his entire tax package as a whole. Because of House rules, they cannot take up Gov. Wolf's proposal or a similar proposal again (without voting to suspend the rules), making the entire package effectively dead. Of course, there is still a threat of "piecemeal" tax increase as part of this year's budget.
However, we encourage Gov. Wolf to start working with lawmakers on meaningful policy changes, including pension reform, liquor store privatization, union contract transparency, spending limits, prevailing wage reform and mandate relief, and expanding school choice.
The status quo just isn't good enough.
Friday at noon we'll be hosting a live chat on the Pennsylvania state budget.
Public sector union contracts are a huge cost for the state government, and they have also become a conflict of interest for Gov. Wolf. He will be negotiating contract deals with 16 unions–which contributed millions of dollars to his gubernatorial campaign–behind closed doors, but some legislators want to open these doors to the public.
CF’s president & CEO Matt Brouillette recently spoke with Dom Giordano on Talk Radio 1210 WPHT in Philadelphia about several transparency bills that passed in the state Senate.
As Matt points out, SB 644, would put "a price tag on what the governor and the unions have negotiated” by empowering the Independent Fiscal Office to estimate the costs of public sector union contracts prior to ratification.
The second bill, SB 645, requires public sector collective bargaining agreements to be posted on state, school district, or local government websites two weeks prior to signing–giving the taxpayers a chance to see government union contracts before they have to pay the bill.
Listen below or click here for the interview.
The Dom Giordano Show airs every weekday from 9 am – 12 pm.
Read Matt's op-ed Wolf Negotiates Billions with Unions Who Gave Him Millions for more.
"It's not good enough to just say no and continue with the same old same old." So said Gov. Tom Wolf during his budget address, making clear his administration is committed to finding solutions, compromising, and working with both Republicans and Democrats to improve Pennsylvania.
Unfortunately, the governor isn't practicing what he's preaching.
Angela Coloumbis of the Inquirer reports that Wolf's spokesman Jeff Sheridan has emphatically repeated Wolf's opposition to Senate pension reform legislation and other Republican ideas to end business as usual in Harrisburg.
As I point out in a recent letter to the editor, Gov. Wolf needs to stop blocking transformative reforms—like liquor store privatization, pension reform, and the Taxpayer Protection Act—critical to achieving prosperity for all Pennsylvanians.
I’m disappointed to see Gov. Wolf’s spokesman Jeff Sheridan accuse Sen. Bartolotta (Governor wants to reinvest in higher education, April 29) of having a “profound misunderstanding” of middle class families, while at the same time misleading readers about how Gov. Wolf’s proposal harms those same middle class families.
Sheridan conveniently fails to mention that Wolf proposed taxing university fees, textbooks, and meal plans—to the tune of $150 million per year.
Middle class students will pay the brunt of that burden—as will middle class families paying more for nursing home care, day care, diapers or utility bills. A recent study by the Independent Fiscal Office notes that every income group will pay more under Wolf’s tax increases.
While Sheridan repeats campaign slogans about changing the status quo and blames the previous administration, Wolf’s budget calls for more of the same. Following decades of spending increases and tax hikes, Pennsylvania’s tax burden rose to the 10th highest in the nation. As a result, Pennsylvania has ranked among the worst states in job, income and population growth for 40 years.
Ironically, it is Gov. Wolf who is saying “no” to needed reforms to get our state on the right track. He has already threatened to veto liquor store privatization and has indicated opposition to pension reform. Wolf has also been silent on Sen. Bartolotta’s own Taxpayer Protection Act—which would limit the growth of state spending and unleash the private sector.
Higher taxes and spending won’t fix Pennsylvania’s economy, and it’s time for Gov. Wolf to stop blocking reforms that will offer prosperity for all Pennsylvanians.
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