An Inhospitable Tax Increase - Commonwealth Foundation

Another day, another tax. The newest plan to fill a $2.2 billion budget hole includes a 5 percent increase to the hotel tax, along with a new tax on fireworks and third-party online sellers like eBay and Amazon.

Siri – find something new to tax in PA #PABudget

— Dawn Keefer (@dwkeefer) October 4, 2017

Like the warehouse tax, raising the hotel tax would put Pennsylvania businesses at a severe disadvantage:

Via @AP: A 5% state hotel tax increase would give Philadelphia and Pittsburgh the nation's No. 1 and 2 hotel taxes, 20.50% & 19%. #pabudget

— Marc Levy (@timelywriter) October 3, 2017

The singular focus on including a recurring revenue stream—via tax hikes—is not only dangerous to the economy, but it overlooks the fact that Pennsylvania's fiscal woes stem from unbridled spending, not a lack of revenue. As we wrote last month,

. . . tax hikes will only make our problems worse. Borrowing will increase costs for taxpayers and higher taxes will stunt already anemic economic growth, thereby compounding the state’s budget difficulties.

To reiterate, Harrisburg's problems don't stem from taking too little out of Pennsylvanians' pockets. Since 2011, General Fund revenue has grown by more than $3.5 billion after accounting for tax refunds. In contrast, state spending has risen by $4.9 billion.

I haven't seen so many people work so hard to raise taxes before.

— Rep. Seth Grove (@RepGrove) October 3, 2017

Raising taxes to feed the state's overspending habits should concern all taxpayers, especially considering the short-and-long term alternatives available to lawmakers. Here are just a few:

Reduce corporate welfare subsidies given to special interests, like the $250 million available to the horse racing industry.
Tap the surplus funds in the state's shadow budget.
Enact liquor reforms, which could raise hundreds of millions of dollars in revenue.
Accept Gov. Wolf's spending freezes, totaling approximately $188 million.

These recommendations are just a start, but they do protect taxpayers in the interim. Over the long-term, lawmakers will need to reduce costs by embracing innovation in state government. Only then can Pennsylvania begin to unlock its potential as the economic hub of the Northeast.