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UPDATE: Don’t Call it Recurring Revenue; It’s a Tax Increase

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UPDATE: Not much has changed on the budget since last week. On the plus side, Governor Wolf changed his position on using fund transfers to balance the budget. He went from saying all of the money proposed in the fund transfers (see here) was promised to other projects and there was no way it could be used to balance the budget; his current position is that $500 million is available to use to balance the budget.On the downside, Republican leadership in both chambers of the General Assembly seem dead-set on making Pennsylvania less competitive by raising taxes on targeted industries. The first target, which now seems to be off the table, was commercial warehousing. According our sources, Rep. Dave Reed (R-Indiana County) was advocated for making lease payments on warehouse space subject to the sales tax. The fact that this tax would have made Pennsylvania non-competitive and put thousands of people out of work seems to have eliminated this proposal from consideration. The latest proposal would be to nearly double the Commonwealth’s hotel tax rate. Again, one of the chief advocates for the higher tax rate is Rep. Dave Reed.

As we have repeatedly noted, a better long-term solution would be to actually cut spending rather robbing from Peter to pay Paul. We’ll let you know about any changes as they develop.

Politicians have long used Orwellian double-speak to hide their true intentions. The latest iteration of this trend in Pennsylvania is the Governor’s, Senate’s and House Democrat’s insistence on including “recurring revenue” in any budget agreement. Recurring revenue sounds much more pleasant than what they’re really talking about: tax increases.

Roughly three months ago Republican leadership in the Senate, ceded their super-majority when fourteen Republicans voted with twelve Democrats to pass a Fiscal Code that balanced the budget on the backs of taxpayers. The Senate’s plan, supported by Governor Wolf, would raise taxes on heating bills, cell phone bills, and online purchases. As our friends at the Commonwealth Foundation noted in a recent blog post, the General Assembly has raised taxes four times in the last eight years. These previous tax hikes haven’t solved Pennsylvania’s financial problems. Instead, it has been like a death from a thousand cuts for taxpayers.

Departing from the usual routine of raising taxes, House Republicans offered alternatives to the status quo. The first plan we told you about would have reduced overhead expenses and saved tax payers $370 million. A second plan, which ultimately passed the House would have used surplus, off-budget funds to fill the gap. Unfortunately, only seven Senators sided with taxpayers and voted in favor of using funds already in state coffers.

The next step in the budget process is House and Senate leadership will establish a conference committee and try to work out their differences. The deals hashed out by conference committees rarely work out in taxpayer’s favor because it is a closed-door process. The public, and most lawmakers, usually do not have time to review the finished product. Remember the 2005 middle-of-the night pay raise? That legislation came out of a conference committee too.

Please, take a few moments and email the General Assembly. Let them know that you will be watching their actions closely and that they need to cut spending and use money already collected by the Treasury in order to balance the budget.

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