Time to Move on From Broad Based Tax Hikes

Member Group : PA Manufacturers' Assn.

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Time to move on… Finally… From Broad-Based Tax Increases

The Situation

With dwindling options, Republican legislative leaders are seeking to break the budget impasse by "nailing down" agreements with the governor on some big-ticket items one-by-one. The list includes liquor privatization and pension reform, of course, and the latest: raise revenues through some form of gambling expansion. Hopefully, this approach will lead to a breakthrough and the rest of the budget will fall in line.

"Hell, we haven’t even agreed on an overall spending number yet," proclaimed one House caucus source close to the budget talks. "If we can nail that down then go onto the other areas we can get it done."

Expanded gambling is being considered in the wake of the House defeat of Gov. Wolf’s latest request for broad-based tax increases. This time the ingredients in the witch’s brew were a new extra tax on the natural gas industry and an increase from 3.07 percent to 3.57 percent in the personal income tax (PIT). Republicans were unanimous in opposition, while all but nine House Democrats walked the plank for the governor’s tax hike plan. (Vote Roll Call, Click Here)

"Governor Wolf is enforcing a state government shutdown to extort tax hikes from the General Assembly," said PMA President David N. Taylor. "His plan is not working and will not work, as is apparent to everyone except him."

A United Front

The governor, to be sure, keeps underestimating the resiliency of the Republican-controlled General Assembly during a budget impasse that is now in its 16th week.

"It hasn’t been hard to keep the caucus together," said Senate GOP spokesperson Jennifer Kocher. "The driving force behind that is that when members are in their districts talking with constituents the message is very clear – please do not raise my taxes in order to increase government spending."

To make matters even tougher for the governor, the goals of Senate and House Republican caucuses have rarely been more in sync.

"We don’t have the infighting that we had in the past," said one long-time House member. "We don’t have leadership in the Senate or House trying to make side deals to get things they want. We are all on the same page on this."

And pleasing conservatives and government reform advocates, lawmakers are motivated now more by personal conviction and their constituencies than the temptation of WAMs (walking around money), or threats of reduced office space or less prestigious committee assignments.

The overall complexion of the General Assembly and the way of doing business has changed, says G. Terry Madonna, Professor of Public Affairs and Director of the Center for Politics and Public Affairs at Franklin and Marshall College.

"The WAMS I’m sure are still there somewhere but they aren’t nearly what they used to be," Madonna said. "And no one is being bullied into making a vote for or against something. "

Repeated attempts by the governor to divide and conquer within the caucuses have failed. The latest round of tax increases, for instance, contained a provision that would ban a driller’s deducting post-production costs from a landowner’s royalty check. The deductions have been a concern for some Republicans lawmakers in the Marcellus drilling areas where in some instances the post-production costs have piled up so high that landowners receive no royalties. But Rep. Garth Everett (R-Lycoming), who has led attempts to ensure that landowners get all the royalty payments they deserve, told Capitolwire:

"This royalty issue is the issue nearest and dearest to my heart, but it’s not that near and dear to increase my constituent’s taxes by what they want to do."

Public Scrutiny

One silver lining to the drawn-out budget process is that it has given voters, and lawmakers, plenty of time to scrutinize the governor’s tax increase proposals. They have become even more staunchly opposed as they set them apart from talk of grander plans and understand that no one is immune from paying more.

The governor’s repeated calls for increasing taxes on middle class Pennsylvanians, the very people he promised to lift up in his March budget address, aren’t winning him friends outside the Capitol either. A recent Quinnipiac poll shows the governor has a negative 41 – 44 percent job approval rating, down from a positive approval rating in August.

"The longer this goes on the more members understand how these taxes hurt us all," said a high-ranking staffer with the House Republican caucus.

"You might think members from the southeast might break on a severance tax, but when they think about what the shale drilling has done for the Marcus Hook refinery down there, it’s a no brainer for them to be against it."

On the personal income tax, Rep. Brad Roae (R-Crawford) last week on the House floor summed up the inherent unfairness of an increase there. "There should never be a reason to increase a percentage tax, especially the income tax," Roe said. "It’s completely unfair to middle class Pennsylvanians. Their income taxes have risen over the years just as their incomes have increased. If we feel we have to increase their taxes we are over spending. "

Which all leads us to where the solution lies, which is consonant with what the Republicans have been saying all along. We need to staunch the hemorrhaging of our public pension systems, SERS and PSERS. Funding their unfunded liabilities robs core government services, including basic education funding, of billions of dollars. And sell-off a government asset that is anything but an asset for consumers: the state-controlled liquor system. The result will be, as it was in late June, a balanced budget with more funding for social services, and increased basic education funding, without raising taxes. Seems like everyone but the governor can agree on that, but perhaps there’s hope.

James Joyce, Ulysses: "Think you’re escaping and run into yourself. The longest way round is the shortest way home."

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