Proposed Pennsylvania Sales Tax Expansion Categories

As part of his budget, Gov. Rendell has proposed lowering Pennsylvania’s sales tax from 6% to 4% (Philadelphia has an additional 2% and Allegheny County 1% on top of the state rate), but expanding the base to include 74 categories previously exempted. The full list, with value (based on the 6% rate) is below.

Which items will cause the most controversy? For starters, the largest item, advertising, will face opposition by both advertisers and newspapers. Taxing of specific services – accounting, consulting, engineering, computer programming, dry cleaning, etc. – won’t go over among those providers. Small ticket, but popular, items like coal and flags will also draw ire (e.g. “it’s un-American to tax the flag”). Another interesting one is gratuities, as businesses won’t be able to pass that on to customers, but will have to deduct it from the pay of employees. Finally, Gov. Rendell proposes a repeal of the helicopter exemption – which was passed just last year, in order to get Rep. Houghton to vote for the budget deal.

It should also be noted that the sales tax proposal is not a cut, or even revenue neutral, but a net tax increase on Pennsylvanians – about $530 million next fiscal year and approaching $900 million over a full year. (It also undermines proposals to eliminate the property tax with a sales tax expansion).