Is Rendell Cutting Taxes?

Brett Lieberman of the Patriot News has an intriguing back and forth between myself and Governor Rendell and Budget Secretary Michael Masch on their tax plan.

Despite a massive increase in new tax revenue, the Governor insists he is cutting taxes by $6 for the average person:

By Rendell’s math, his budget includes $180 in new taxes on most Pennsylvanians, but $186 in savings for those who are homeowners and nonsmokers, largely by speeding up property tax cuts.

The net result: “We’re saving taxpayers $6,” he said.

Sound absurd? Heres why:

  • Governor Rendell’s “average taxpayer” is a homeowner, who doesn’t smoke. Only homeowners will see some tax rebates, while renters and smokers will pay more.
  • Governor Rendell doesn’t count taxes on businesses, which are nearly half his tax increase. But taxes on businesses are taxes on people.
  • Governor Rendell’s estimated “savings” include revenue from gambling, which was passed two years ago. Of course, next year the state will collect nearly $1 billion from taxes on gambling losses (not included in either our, nor Gov. Rendell’s estimate of tax increases)
  • Governor Rendell apparently estimates that his sales tax increase will only cost $180 on the average family/homeowner. But our estimate is that this tax increasewill amount to $110 per-capita, or $460 per family of four. While some of the sales tax is paid by business purchasers and by “the rich” rather than the “average taxpayer,” it is clear the Governor’s estimate understates the effect of this tax.

The following chart displays Rendell’s proposals, paying homage to his claim of tax cuts.