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Taxes and Revenue in Pennsylvania Budget Deal

Gov. Rendell and legislative leaders from three caucuses (House Republicans were not involved) announced a deal on the Pennsylvania state budget.  Via PLS and Capitolwire (subscription), here are some of the details.

Spend total: $27.945 billion (this does not include paying off deficit from last fiscal year, which ended about $1.7 billion in the red).

Tax Increases ($821 million):

  • Retroactively increasing and delaying the phase-out of the Capital Stock & Franchise Tax. This is a tax Gov. Rendell said was the most harmful to Pennsylvania’s economy. It is estimated to add $374 million in 2009-10 and $550.6 million to state revenue collections.
  • Expansion of the sales tax to tax admission to concerts, museums, theaters, etc.  Estimated to collect $100 million in tax revenue.
  • Legalizing and taxing table games in casinos. Estimated (based entirely on conjecture, given the failure of slots to raise what was projected) to generate $200 million, between both the tax and license fees.
  • A 25 cents per pack increase in Pennsylvania’s cigarette tax – a tax which disproportionately affect the poor, is a declining revenue source, and leads to smuggling (and will add on to the recent federal cigarette tax increase). This is to be estimated a $97 million tax increase this year and $146 million next year.
  • Applying cigarette tax to small cigars: $30 million estimate
  • Tax on small games of chance (e.g. Bingo): $20 million estimate

Tax Cuts ($74 million):

  • Reforms to the Corporate Net Income Tax – increasing the sales factor in calculating the tax, and increasing Net Operating Loss carryforward limits – estimated to be a net reduction of $74 million.

Additional Revenue Sources ($335 million):

  • Expanding leases for natural gas drilling in the Marcellus Shale formation, estimated $65 million in additional revenue, in addition to $143 million from current leases.
  • Redirect of cigarette tax in HCRPA to General Fund: $171 million.
  • Redirect of motor license fees (probably those charged to MCare): $44 million.
  • Eliminating tobacco cessation spending: $16 million.
  • Suspension of certain tax credits: $39 million.  It seems as though Gov. Rendell has preserved his precious film tax credit.

One-Time Revenue Sources ($2.14 billion):

  • Rainy Day Fund: $755 million (exhausting the fund)
  • Health Care Provider Retention Account: $708 million (draining the fund)
  • Transfer of $100 million from “MCare Fund Supplemental” surplus.  I’m not clear how this differs from HCPRA.
  • Accelerating due date of sales tax: $211 million (in 2010-11, acceleration of Personal Income Tax: $159 million).  I’m not sure why acceleration this year won’t result in less revenue in later years.
  • Transfer from Tobacco Endowment Fund: $150 million.
  • Tax amnesty for deliquent taxpayers: estmate of revenue increased to $190 million.
  • $25 million from liquor store profits.
  • Other budget transfers: $10 million.

Federal Stimulus Funds ($2.4 Billion)