At the end of last month, Gov. Wolf vetoed the Republicans’ budget, criticizing it for failing to meet his lofty goals of closing the structural deficit, increasing education funding through higher energy taxes, and providing property tax relief to homeowners. Those goals come with a hefty price, primarily more taxes for Pennsylvanians at all income levels.
Here’s why: If we concede (we shouldn’t) the severance tax won’t hurt people in low and middle income households, it still won’t raise enough revenue to pay for the governor’s education proposals, let alone his plan to reduce property taxes or close the deficit. To raise enough revenue for all three priorities, he needs broad-based tax increases, which Republicans have ruled out.
Right now, there has not been any better ideas presented to us than increasing the personal income tax, increasing the sales tax, while providing the property tax relief that was not included in their budget
The governor has drawn a line in the sand: Either tax low and middle income families or Pennsylvania continues to operate without a budget. His position is puzzling considering he campaigned on protecting low and middle income people from tax hikes.
Not only is Gov. Wolf breaking one of his core campaign promises, but his position won’t fix what he sees as some of the state’s biggest problems:
The structural deficit: His own budget plan—and the gigantic tax increase accompanying it—won’t eliminate the structural deficit. According to the Wolf Administration’s own calculations, by 2016-2017, the state would face a $318 million deficit under his plan.
Severance tax/education funding: The governor wants to impose a severance tax on the natural gas industry. He’s too late. Pennsylvania already has a severance tax, but it’s described as an impact fee. And according to the Independent Fiscal Office, it’s the equivalent of an effective 4.7 percent tax rate on production. The revenue raised from the tax rate is just one of the many taxes the natural gas industry pays.
Yet the governor continues to push for an even higher severance tax to “restore education funding cuts of the last four years.” There are two problems with this narrative. One, education spending is at its highest level ever. Two, there is no link between higher levels of education spending and academic achievement.
Property tax relief: Providing property tax relief through tax shifting treats the symptom instead of the disease. Property taxes are on the rise because education spending is ballooning. If the state shifts the tax burden, but doesn’t control education spending, taxpayers will continue to take a hit, just in a different pocket.
Gov. Wolf can break the budget impasse and provide Pennsylvanians the “fresh start” he promised during the campaign, but he’ll need to abandon his fixation on the stale policies of the past.