Clintonian Style Tax Debate

Member Group : Lincoln Institute

In his efforts to escape legal entanglements resulting from the Monica Lewinsky scandal, former President Bill Clinton once answered a prosecutor’s question by saying "it depends on what the meaning of the word ‘is’ is." That quote quickly became the gold standard in rhetorical equivocating.

Politicians here in Penn’s Woods are working hard this budget season to be Clintonesque in the parsing of their words. Given the shambles that is the commonwealth’s finances, the word games are – as you might expect – especially clever on the topic of taxes and the budget.

Leading the parade are the Republican leaders in the state Senate who are at odds with Governor Tom Corbett and their more conservative colleagues in the state House who have vowed to hold the line on taxes and to bring spending under control. Senate leaders, by contrast, are fighting tooth and nail to increase spending and to raise taxes.

Oops, that’s right, they aren’t taxes; they are fees.

The main targets this year are companies drilling for gas in the Marcellus Shale region. Scarnati and company are acting like Ritalin-deprived school children in their desire to tax the gas industry more; they can hardly contain themselves. The GOP’s top senator wants to add a $10,000 annual tax per well in addition to the wide array of other taxes already paid by the gas drillers. He calls this a fee because the money would go to local municipalities and to the state’s Growing Greener fund, itself a cleverly named honey pot for lawmakers.

Scarnati calls the tax a fee because he knows Governor Corbett and many legislators have signed a no new taxes pledge promoted by the pro-taxpayer group Americans for Tax Reform. ATR’s leader, Grover Norquist, said the fee is a tax. So now, Senate Republican Leader Domenic Pileggi has offered legislation which would implement the tax, but designate the proceeds to offset future – future, not current – property tax obligations for senior citizens.

Scarnati and Pileggi are playing the "meaning of the word ‘is’" game. Their "it’s for the kids" reason for implementing a severance tax on Marcellus Shale gas didn’t fly; then their "it’s for the environment" excuse didn’t work; now Pileggi is playing the "it’s for the old people" card. He says he is doing this to get around the no tax hike pledge. In this age of the TEA party, however, voters are too astute to be fooled by such semantical games. Simply put; voters know a tax when they see one – and this is a tax.

All of this is playing out against the backdrop of the other great rhetorical game unfolding along the banks of the Susquehanna. That is the spending interests insistence that the state has a budget surplus. This came about because revenue collections for April and May ran some $500 million over projections. This says the spend-a-holics is a surplus. However, with the state’s general fund budget sporting a $4.5 billion deficit, the $500 million increase in revenue simply reduces the deficit to $4 billion. A $4 billion deficit is a deficit no matter how you define "is."

It is true the state’s current fiscal constraints have resulted in painful budget cuts, especially in education. But the cuts are happening largely because in the last two budget cycles former Governor Ed Rendell, with complicity by the senate’s GOP leadership, applied federal stimulus money to the base of the education budget even though they knew that revenue stream was temporary. Having played Santa Claus, the state must now be a Grinch and take back some of its largess.

As for the fact revenue has exceed projection the past couple of months, look for that to be temporary also. In just the last ten days the economic recovery has shown signs of faltering with housing prices dropping, unemployment rising, and the fed printing more money which will trigger higher inflation. It would not be prudent to budget based upon the track record of the past few months.

But under the capitol dome a tax is a fee, a deficit is a surplus, and all too many legislators of both parties fail us by continuing to allow special interests to feed at the trough rather than to make the tough, but necessary budget decisions that true leadership demands. Assuming they know what leadership is; which of course depends on how you define "is."

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal. His e-mail address is [email protected].)

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