Spending Diet Step #3: Stop Over-Taxing

Commonwealth Foundation calls on lawmakers to return the state’s $650 million surplus to taxpayers

HARRISBURG, PA — Today, the Commonwealth Foundation called upon the General Assembly to return the state’s surplus to its rightful owners—Pennsylvania taxpayers. General Fund revenues for FY 2006-07 totaled $27.4 billion, which was $649.6 million over estimate.

“Once again, Pennsylvania taxpayers were over-billed by Harrisburg,” said Matthew J. Brouillette, president and CEO of the Commonwealth Foundation. “It is incumbent upon Gov. Rendell and the General Assembly to return the excess money to the hard-working men and women of this state and reduce their tax rates accordingly.”

Despite higher-than-anticipated receipts, Gov. Ed Rendell and members of the General Assembly continue to advocate new taxes. “The governor’s already dubious electricity tax proposal is particularly unreasonable in light of this surplus. No wonder he has attempted to disguise the plan by employing the euphemistic term ‘systems benefit charge’ to describe what ordinary Pennsylvanians would simply call a tax,” said Brouillette. “Policymakers should be looking for ways to return this surplus to its rightful owners, not dreaming up new tax and borrowing schemes.”

State and local taxes consume 10.8% of Pennsylvanians’ income, or about $4,400 per person, a 16% increase over 1990 levels, according to the Tax Foundation. Now, Pennsylvanians are paying even more than the government planned to spend.

Fortunately, some legislators recognize a surplus for what it is: an indication that the taxpayers have overpaid. House Bill 1641, introduced last week by Reps. Tom Quigley (R-Montgomery) and Mike Turzai (R-Allegheny), would reduce the state Personal Income Tax (PIT) to 2.99% from its current rate of 3.07%. The PIT rate was 2.8% when Gov. Rendell took office in 2003.

Enacting House Bill 1641 would keep an estimated $270 million per year in the pockets of Pennsylvania’s taxpayers, an amount representing 41% of the current-year surplus. “We applaud this proposal, which recognizes that the money belongs to the taxpayers, and we urge other members of the General Assembly to direct their efforts at rectifying the over-billing, rather than seeking new ways of spending this year’s surplus, “ said Brouillette.

Reducing the tax burden on working Pennsylvanians is Step #3 of the Pennsylvania Diet Plan—a balanced approach to helping restore state government to its proper role and healthy function in our daily lives. The Foundation’s three-step program will help state government shed billions of dollars in unconstitutional, unnecessary, and wasteful spending—and, in the process, expand the financial well-being and economic prosperity of all Pennsylvanians. The “Three Steps to Fiscal and Economic Health” are:

  • STEP #1: Limit the Annual Growth in State Government Spending
  • STEP #2: Empower Voters with the Right to Accept or Reject ANY and ALL Tax Increases
  • STEP #3: Reduce Pennsylvania’s Tax Burden on Job Creators & Families

“By returning the tax surplus to those who pay the bills for government spending, lawmakers can take the first step to restoring fiscal and economic health to the Commonwealth,” said Brouillette.

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The Commonwealth Foundation (www.CommonwealthFoundation.org) is an independent, non-profit public policy research and educational institute based in Harrisburg, PA.

PADietPlan.com, a project of the Commonwealth Foundation, is an educational campaign to restore Pennsylvania’s fiscal and economic health through a three-step program of spending restraint, taxpayer control, and tax reduction. For “The Pennsylvania Diet Plan: Three Steps to Fiscal and Economic Health,” go to www.PADietPlan.com.

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