Tax Hikes
Higher taxes could become the ‘pay raise’ of 2007
The political climate in Pennsylvania for the past two years has been dominated by one issue: the middle-of-the-night legislative pay increase enacted in July of 2005.
Electoral fall-out from that vote has surpassed that of any legislative act in recent state history. A sitting state Supreme Court justice, one-fourth of the legislature, and a fledgling reform movement have all flowed from the pay hike vote, which of course has since been rescinded.
The lifespan of the pay raise issue has been remarkable. But, just as Father Time must give way to the baby New Year so too may the pay raise issue be supplanted by another bellwether issue – taxes.
Governor Ed Rendell, who is constitutionally term limited and cannot seek re-election, is proposing raising or creating no fewer than seven different taxes. Chief among the “revenue enhancements” sought by the governor is an increase in the state sales tax from 6% to 7%, and the enactment of a socialized medicine program to be paid for by new taxes upon state employers.
The legislature has been predictably cool to the governor’s tax proposals. Nothing could be more politically unpalatable to the 53 new legislators than to have their first significant vote be to raise taxes. Republicans were booted from majority status last year largely for their sheep-like rubber stamping of Rendell’s first term agenda. To continue down that path would be folly. And Democrats, newly empowered with majority status in the state House, remember all too well that back in the early 1990s their votes to raise taxes consigned them to a decade on the back benches.
It would appear, at first glance, that tax increases are dead on arrival. But, appearances can be deceiving. Republican leaders in the House are privately keeping their options open. In the Senate, a bill to constitutionally limit state spending has reached critical mass, but it won’t be approved in time to have an impact on the current budget process. A similar measure had numerous co-sponsors in the last legislative session, but many of them voted for budgets with increases that exceeded the proposed amendment’s cap. They talked one way, and voted another.
And then there are the Democrats. Senate Democrats are going to be bit players. In a substantial minority and suffering from weak and depleted leadership with their main power player, Vince Fumo, beset with legal problems, they are in no position to exert much influence on the process. Republicans are the story in the Senate, but the GOP has new and untested leadership and it is unclear whether or not they will be able to go toe-to-toe with Rendell in budget negotiations.
What will happen in the House is anybody’s guess. House Speaker Dennis O’Brien is a member of one party, but largely elected to his leadership position by the other. Sam Smith, the highest-ranking Republican, was never meant to be the top leader and has thus far been ineffective in the role. Bill DeWeese, the Democrat leader is more experienced and likely to dominate. But, with a razor thin majority and many members fearful of voter reprisal, he may not be able to build a consensus behind any tax hike.
A newly engaged electorate is watching closely. Democrats are more likely to support increased taxes and not have to pay the political price. Their base vote consists of most of the spending interests who will reward, rather than punish them because the new and higher taxes will flow into their pockets.
It is a different story for Republicans. The Republican base is at its core a smaller government, less taxes constituency. It is also an electorate that in 2006 showed a far greater willingness to heave its elected officials overboard in the primary when they strayed from party orthodoxy.
Thus, if Republicans in the General Assembly cave during the upcoming budget process and provide the votes that give Governor Rendell the higher taxes and massive new spending he proposes, the tax issue will likely become the 2007 equivalent of the 2005 pay raise vote.
