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Failed tax hike attempts and more PA budget updates

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Commonwealth Foundation for Public Policy Alternatives
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Tuesday, October 10, 2017

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Dear CF Friend,

Last week, the State House and Senate held session with the intent to finalize the state budget. Here’s what went down:

Three days, three tax hikes scuttled

  • On Monday, lawmakers discussed imposing the sales tax on commercial storage, something Gov. Wolf had proposed in his original budget. But when warehousing companies and local chambers explained that would drive business to other states, bipartisan opposition killed that idea.
  • Tuesday afternoon, the discussion turned to an additional 5 percent hotel tax. This tax, on top of the state sales tax and local hotel taxes, would have made Philadelphia and Pittsburgh first and second in the nation in hotel taxes. Like the warehouse tax, the hotel tax garnered little support and died before the night was over.
  • By Wednesday, Gov. Wolf and the House Democratic leaders forced a procedural vote on a severance tax bill. This voted failed with bipartisan opposition—only 83 House members supported it (19 shy of the minimum needed to pass it). This is the second time in three years the House has effectively voted on a severance tax, both times defeating it with bipartisan opposition.

In anger, Gov. Wolf blamed the House for not voting to raise taxes and claimed the (bipartisan) opposition to job-killing tax hikes was an effort to make him look bad.

Bad ideas emerge

Gov. Wolf then announced he would unilaterally borrow more than one billion against the state liquor store revenue. This plan is not only legally questionable, but financially ridiculous. As my colleague Bob points out, the state stores haven’t been making money—last year’s payments to the General Fund required taking $114 million in reserves. The PLCB is currently $350 million in the red.

Wolf then announced he would veto the Human Services Code—legislation that passed with bipartisan support in both the House and Senate—because it includes a work requirement. To be clear, this requirement is that the governor must request a federal waiver (allowing the governor complete flexibility in design) to implement work or work search requirements for able-bodied, childless adults. As my colleague Elizabeth points out, other states’ experiences have shown that work requirements help individuals move off the welfare rolls and dramatically increase their incomes as they transition into meaningful occupations.

A positive step

Finally, late last week, the Wolf administration announced it would release approval of EITC and OSTC tax credit letters. As Bob pointed out, Gov. Wolf had been withholding these letters, which allow tax credits for donations to student scholarship and education services organizations. But following outcry from private schools, nonprofit organizations, and state legislators, Gov. Wolf decided he can approve the letters (even though nothing has changed regarding the budget).

What’s next?

It was quite a whirlwind week, and no one is singing kumbaya in the Capitol right now.

But one thing is clear: Both non-tax-hike solutions to close the budget gap and transformative reforms to help people rise from dependency to self-sufficiency exist and have significant support in the legislature.

It’s time to push both over the goal line.

Please urge Gov. Wolf to sign critical welfare reform, and tell your lawmakers to balance the budget with real alternatives that protect working families from higher taxes.

Thanks,

Nate

Nathan A. Benefield
Vice President & COO

P.S. Click here to send your message to Gov. Wolf and click here to send a message to your senator and representative.

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