Three Takeaways on Gov. Wolf’s 2021 Budget
Our commonwealth faces a structural budget deficit. Families need education lifelines to get back on track. Small businesses need regulatory and tax relief to stay afloat. Patients need more options to access care.
Governor Wolf’s budget proposal addresses none of these critical issues. Like his past budget proposals—even before he was a lame-duck governor—this one isn’t going anywhere. Instead, lawmakers have an opportunity to launch an agenda to prioritize kids and communities.
Wolf’s Tax Hike Targets Families and Small Businesses
The centerpiece of Wolf’s budget proposal is the largest tax hike in Pennsylvania history—a massive 46% increase in the state income tax on working middle-class families and small businesses.
While Wolf proposes a questionable “tax forgiveness” scheme, families at the median family income—with fewer than five children—would pay more.
Even with the tax forgiveness, Wolf’s proposal is a net $2.96 billion tax increase, representing $232 per resident (or $927 per family of four).
Notably, Wolf’s massive tax hike hammers local, small businesses. Most small businesses—sole owners, partnerships, LLCs, and S-Corporations—pay the Personal Income Tax. Approximately 855,000 small business owners paid the Personal Income Tax in 2018.
Our local small business owners need help, but Wolf seems to be doing everything he can to destroy their livelihoods.
First, he enforced business shutdown orders, then he vetoed legislation to protect business owners from frivolous lawsuits. Now—just when they can start to get back on their feet—Wolf proposes burying restaurants, bars, salons, small gyms, dry cleaners, and a whole host of others with a massive small business tax hike. And small businesses that lost money in 2020, unlike their corporate competitors, can’t even deduct their losses in future years.
Wolf’s scheme creates an unfair and unequal tax system that punishes working middle class families. His plan to get around Pennsylvania’s flat tax is unconstitutional and relies on Harrisburg bureaucrats to redistribute the hard-working taxpayers’ money.
Wolf’s Education Plan Funds Empty Buildings, Not Parents and Students
Pennsylvania school districts have already received more than $3 billion in emergency funding while sitting on $4.6 billion in fund reserves. Districts haven’t seen any reductions in state subsidies—even though enrollment has declined by 50,000 students this year as parents seek other options during the pandemic.
Roughly 40% of districts remain physically closed, in many cases against parents’ wishes. Wolf’s plan to pump more money in school districts while stifling charter schools and scholarship programs undermines education equity and exacerbates pandemic learning loss, harming the most vulnerable.
While private and charter schools are providing the learning opportunities families want, more than 40,000 students are denied tax credit scholarships, and thousands more are on waiting lists for seats in charter schools. Parents need more educational options.
Wolf Ignores Overspending, Unemployment, and Pa’s Economic Woes
Under Wolf, state spending has dramatically accelerated without improving Pennsylvanians’ standard of living. Total operating spending has increased by more than $24.5 billion (more than $1,900 per person), and two of the last six budget cycles have resulted in tax increases.
Wolf has made no effort to control overspending during the current recession. Instead, he continues to pile debt onto our children and grandchildren. Wolf has repeatedly overspent the approved budget—by $400 million in 2016–2017, $673 million in 2018–2019, and more than $1 billion in 2019–2020. Lawmakers should expect another hefty supplemental request in June to cover these hidden spending increases.
Pennsylvania’s Independent Fiscal Office projects it will take six years for employment to recover from the recession caused by COVID and Wolf's lockdown. That's far too long for families and small businesses.
Pennsylvania continues to lose residents fleeing to other states for better economic opportunities. Wolf’s budget proposal does nothing to help businesses rehire workers, jump-start our economy, or support families.
Lawmakers Should Launch a Race to Rebuild
Instead of using Wolf’s plan as a starting point for budget negotiations, lawmakers should move forward with their own agenda—one that launches a race to rebuild and cares for kids and communities.
To start, lawmakers should streamline regulatory red tape to spur hiring, provide tax relief that permits small businesses to deduct losses, and protect local small businesses from frivolous lawsuits.
We need to act now to reopen businesses and restaurants, reduce excessive barriers to employment, and privatize the government-run liquor system to help grow the economy.
To protect future generations of Pennsylvanians from tax hikes and overspending, lawmakers should pass the Taxpayer Protection Act – constitutional spending limits that limit the growth of state spending to the average combined rate of inflation plus population growth.
Lawmakers can ensure our health care system is always prepared by making regulatory waivers permanent, expanding practitioners’ scope of practice, and enhancing telemedicine.
Lastly, it’s time to get kids and families back on track. Elected officials should act immediately to make it easier for parents to select an educational option that works for their child. Lawmakers should establish Education Opportunity Accounts, expand Pennsylvania’s highly successful and popular tax credit scholarship programs, and implement a fair charter school authorization process to provide excellent education for all.