Pennsylvania State Budget
What do waking up, driving to work, and stopping at Starbucks have in common? Each of these seemingly mundane activities is impacted by state taxes. It’s time to break this cycle and spend smarter before resorting to tax hikes.
In the eight years before Gov. Wolf took office, General Fund spending increased by $2.85 billion. Wolf wants to tie or exceed this amount in just two years.
As Gov. Wolf pushes for a multi-billion tax increase, the Taxpayers’ Caucus identified $3 billion the state can realize through reducing waste, growing non-tax revenue, and implementing accountability measures for existing programs
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Less than one week remains before the state budget deadline, and details are slowly emerging about a $31.5 billion spending plan.
This $1.5 billion spending increase would be the largest spending hike in a decade. Moreover, this increase is more than 5 times the rate of inflation plus population growth, and is about $1.1 billion more than net revenues for the year.
So where do Gov. Wolf and some legislators propose coming up with the additional money? Here is some of what we know or have heard so far:
- Gov. Wolf and legislative leaders have said sales and income tax increases are off the table—but he, along with some lawmakers, are looking at many others ways to extract more in taxes from families and businesses.
- Approximately $150 million of this additional revenue will come from tax amnesty. Rep. Marguerite Quinn’s tax amnesty bill passed the House this week. Another $100 million would come from lapsed funds (unspent tax dollars). These represent one-time revenue sources that don’t take more from working families.
- The state House is positioning a gambling expansion for final passage. The bill would allow casinos to run internet gambling and allow slot machines in international airports and off-track betting facilities. The estimated state revenue from this expansion is $200 million. That’s significantly smaller than the $300 to $450 million projected from a previous gambling expansion proposal that included video gaming terminals in bars and fraternal organizations.
- Tobacco taxes remain “on the table.” Gov. Wolf’s proposal for a $1.00 per pack tax hike on cigarettes and a 40 percent tax on tobacco products (excluding cigars) are part of budget discussions. As noted by Elizabeth, this $500 million tax hike would hit poor households hardest, is an unreliable revenue source, and results in greater cigarette smuggling.
- A new tax on energy has been rumored. This proposal would impose the gross receipts tax on natural gas sold to homes and businesses. One estimate suggests this proposal would generate $500 million in new taxes. That means more than 2.7 million homeowners (and thousands of businesses) will pay more for their home-heating bill next year.
- Gov. Wolf’s proposal to increase taxes on savings accounts held at banks, and a new tax on Uber and other ridesharing services has also been rumored.
Instead of focusing on a halfway point between the governor’s unreasonable $33 billion proposal and the current $30 billion budget, lawmakers should focus on what taxpayers can afford.
If we learned anything from last year’s nine-month long budget marathon, it’s that Pennsylvanians have no appetite for tax hikes.
According to a new Watchdog.org analysis, Pennsylvania leads in the nation in collections from “sin taxes.” The commonwealth collects more than $2.7 billion annually in taxes on tobacco, alcohol or gambling.
While Gov. Wolf and legislative leaders have declared that sales and income tax increases are off the table for this year's budget, a significant increase in tobacco taxes remains part of the mix.
These taxes have proven to be unreliable and declining sources of revenue.
Current rumors suggest a $500 million tobacco tax increase would be included to support the largest state budget increase in a decade.
Rather than look to more sin taxes, lawmakers should work to control spending growth before asking for more from Pennsylvania families.
The latest budget rumors indicate legislative leadership and Gov. Wolf are negotiating a budget that would spend at least $31.5 billion and upwards of $32 billion. To put these spending numbers in perspective:
- $31.5 billion is $1.1 billion more than net revenue.
- An increase of $1.5 billion would be more than five times the rate of inflation and population growth.
- In the eight years before Gov. Wolf took office, General Fund spending grew by $2.85 billion. If the legislature passes a $32 billion budget, that would equal a $2.85 billion increase in just two years.
Last year, legislative leaders demanded we determine how much is available to spend first, and then to spend within our means. This year’s negotiations are beginning with how much Gov. Wolf wants to spend and then cobbling together the taxes to pay for it.
So-called “sin taxes” may not be as destructive as broad based sales or income tax increases, but they burden low-income households, result in greater smuggling, and extract more money from families who are already overtaxed.
Rather than take more from taxpayers, lawmakers should prioritize spending, cut corporate welfare, address human services spending growth, and enact meaningful reforms for cost drivers such as pensions.