House Budget: Massive Spending Increase
Would Target Poor for Higher Taxes
Proposal Side-Steps Broad Taxes but Relies on Unreliable Cigarette Tax Hike
June 28, 2016, HARRISBURG, Pa.—Monday night, the state House Appropriations Committee passed a $31.6 billion budget that hikes spending by more than $1.5 billion—far less than the $3.3 billion increase sought by Gov. Wolf, but still the largest spending increase in a decade. At the same time, lawmakers avoided broad-based tax increases, planning instead to rely on higher tobacco taxes, expanded gaming, tax amnesty, and projected revenue from the recent expansion of wine sales in grocery stores.
“The good news is that the governor and legislators agree that sales and income tax hikes that would hit all Pennsylvania families are off the table,” commented Nathan Benefield, vice president of policy for the Commonwealth Foundation. “Unfortunately, this budget still spends far beyond our means and looks to raise revenue through targeted tax increases rather than reducing wasteful spending.”
Higher cigarette taxes, specifically, would hit hardest those who can least afford it. From 2010-11, for example, smokers making under $30,000 annually spent approximately 14 percent of their household income on cigarettes. For smokers earning between $30,000 and $60,000, the percent fell to approximately 4. It dropped even further, to 2, for smokers earning over $60,000.
Meanwhile, the Independent Fiscal Office has predicted revenue from the existing cigarette tax will fall by 3.6 percent in the 2016-17 fiscal year. Indeed, revenue from Washington, D.C.'s cigarette tax actually fell by $7 million after the state imposed a higher tax, according to the Wall Street Journal. Furthermore, while increasing the tax may temporarily increase revenue, it would also incentivize cigarette smuggling from across state lines.
The $1.5 billion spending increase in this budget is the biggest year-over-year increase since 2006-07. Along with last year’s budget, it would mark a $2.4 billion increase in Gov. Wolf’s first two years in office—close to the $2.8 billion spending growth of the previous eight years combined. Tax hikes are only necessary if we accept the false premise that these spending increases must be on autopilot
Pennsylvania leads the nation in corporate welfare spending at nearly $700 million per year. Ending wasteful corporate subsidies would free up more revenue than the cigarette tax is projected to raise. Before asking for more from Pennsylvanians, the state should stop giving millions to multi-billion dollar corporations.
As the House considers this $1.5 billion spending increase, lawmakers should reject the business-as-usual approach and protect Pennsylvanians from unnecessary tax increases.
Nathan Benefield and other Commonwealth Foundation experts are available for comment. Please contact Gina Diorio at 862-703-6670 or firstname.lastname@example.org to schedule an interview.
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The Commonwealth Foundation transforms free-market ideas into public policies so all Pennsylvanians can flourish.