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Backdoor $600 Million Tax Increase in Rumored Deal

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NOVEMBER 9, 2015 | News Release by COMMONWEALTH FOUNDATION

Sales Tax for Property Tax Swap Rumor Leaves Taxpayers on the Hook

November 9, 2015, Harrisburg, Pa.—The latest state budget rumors describe a deal to increase the sales tax to provide corresponding property tax relief. Rather than a “dollar-for-dollar” tax shift, this plan would actually increase taxes on all Pennsylvanians by $600 million.

“This backdoor, broad-based tax increase proposal isn’t the kind of compromise Pennsylvania families are looking for,” said Matthew Brouillette, president and CEO of the Commonwealth Foundation. “When revenue-generating alternatives like liquor privatization, pension reform, and corporate welfare cuts are still on the table, ideas that include hundreds of millions in new taxes should be out of the question.”

The latest budget plan would redirect $600 million in slot-machine revenue from property tax relief to the state Treasury, according to an Associated Press report. That money, which would be spent as the governor and Legislature decide, represents a tax increase since any sales tax increase would have to make up the resulting $600 million deficit in property tax relief funds.

For example, if the sales tax was raised to generate an additional $2 billion next year, property taxes would only by cut by $1.4 million—the $600 million remaining would be directed to new spending.

“Why would we redirect slots revenue used for property tax relief but not the $250 million in slots revenue used to subsidize the horse racing industry?” Brouillette responded. “Why should working families pay more to prop up politically-favored businesses?”

“Pennsylvanians have had their fill of shell-game gimmickry during the last four months of budget negotiations,” Brouillette continued. “Rather than concoct creative ways to disguise tax-increasing deals, lawmakers and the governor should seek common ground that spares taxpayers—who already pay the 10th-highest state and local taxes in the nation—from an even larger burden.

“Liquor privatization—not the governor’s widely-panned scheme to lease state stores to a single private operator—would generate new revenue that could prevent any need for tax increases. With options like those still on the table, there’s no need to ask Pennsylvania families for more.”

The Commonwealth Foundation has placed billboards in the Harrisburg area urging action on liquor privatization for additional revenue, rather than tax hikes.

Matthew Brouillette and other Commonwealth Foundation experts are available for comment today. Please contact Gina Diorio at 862-703-6670 or gld@commonwealthfoundation.org to schedule an interview.

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The Commonwealth Foundation transforms free-market ideas into public policies so all Pennsylvanians can flourish

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