Higher Taxes Wont Cure Cancer

Governor Ed Rendell has, on occasion, joked that some state lawmakers would oppose any tax increase, “even if we could cure cancer tomorrow.” Unfortunately, Governor Rendell adopts the opposite view with his tax, borrow, and spend budget—he seems to think that higher taxes could cure cancer, or at least solve a slew of lesser problems.

Governor Rendell argues that too many people don’t have health insurance coverage. But instead of addressing the drivers of rising healthcare costs, so more employers and individuals can afford health insurance, he wants to raise taxes on businesses that don’t provide healthcare coverage. It isn’t important to Governor Rendell how businesses pay for this new tax (whether by cutting jobs, reducing wages, raising prices, etc.) as long as state government collects money to dole out for its own health insurance program.

Governor Rendell also wants to raise taxes on electricity to encourage residents and businesses to conserve power. Additionally, he wants tax incentives to encourage consumers to buy more efficient air conditioners and refrigerators (as though consumers seek out less efficient appliances to pay higher energy costs).

The Governor plans to use the additional tax revenue on electricity to solve another problem—too much reliance on “Big Oil.” He wants to borrow $850 million in bonds and pay it back with higher taxes—to give grants to politically selected companies to create “alternative energy solutions.” Of course, money borrowed by government reduces the amount of money available for private investment. But Governor Rendell believes that he—not private investors and entrepreneurs—should decide which alternative energy companies to invest in.

In addition, Governor Rendell wants to increase taxes on American oil companies by more than 1,000% because he believes they earn too much profit. He claims his Oil Company Gross Profits Tax would not be passed on to consumers. He doesn’t explain how this will be done, but basic economics suggests that this tax increase will indeed be paid by the citizens of Pennsylvania. Of course this will be money that oil companies could use to invest in new refineries or in oil exploration—which would lower the price of gasoline—or they could use their money to invest in research on alternative fuels, or even return their profits to their shareholders (among which are the pension funds for Pennsylvania’s state workers and school teachers).

But apparently Governor Rendell thinks none of those uses are as good as what he would do with $760 million in cash. He intends to give the money to public transit agencies, despite these agencies already receiving increased taxpayer support amidst declining ridership.

The Governor also plans to borrow more money to fund his “economic development” spending, which has thus far failed to rejuvenate Pennsylvania’s economy. The fact that despite the hundreds of millions of taxpayer money doled out to politically selected companies and projects, Pennsylvania remains amongst the worst performing states in the nation when it comes to job, income, and population growth.

But he doesn’t stop there. He also hopes to borrow additional money to give grants to medical researchers—one area of economic growth in Pennsylvania that doesn’t need any more taxpayer subsidies. Then Governor Rendell wants to increase taxes on cigarettes, cigars, and smokeless tobacco to make citizens healthier, as well as raise the sales tax to fill in the funding holes created by his first term expansion of welfare programs that have added hundreds of thousands of people to the public dole.

The common thread in these proposals is that regardless of the problem, Governor Rendell’s solution is to raise your taxes. He clearly believes that state government, under his direction, will better spend taxpayer’s money than they would themselves. Unfortunately, while this bevy of new and increased taxes won’t likely cure cancer, it may very well cause a few heart attacks.

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Nathan A. Benefield is Director of Policy Research with the Commonwealth Foundation (www.CommonwealthFoundation.org), an independent, nonprofit public policy research and educational institute based in Harrisburg.