Ward, Pittman Offer Tax Cut to Counter Shapiro Spending

Member Group : PA Manufacturers' Assn.

In the ongoing process of crafting a General Fund Budget, Senate Republicans have made a decisive move to provide relief to individual taxpayers and small business owners, rather than higher government spending, as Gov. Josh Shapiro proposed in his budget address in February.

Last week the caucus, with strong bipartisan support, approved $3 billion in tax cuts, much of it coming in a reduction of the personal income tax (PIT). The move stands in bold contrast to the governor’s spending plan to pump the same amount into government programs, leading the state down the road to budget shortfalls, requiring tax increases.

The Senate plan represents a true investment, with a guaranteed return, according to research on the impact of tax cuts by the Tax Foundation. And it comes at a time when Pennsylvanians remained dogged by inflation, paying $1,000.00 more each month on average for basic household goods and services than they did just three years ago.

Senate Republican leaders stressed that the tax cuts, which include a break on electric rates, are a continuation of their longstanding efforts to protect taxpayers against unnecessary tax increases, expansive new spending, and unchecked growth in the size of government.

“The Senate Republican Caucus’s top priority has been and continues to be strengthening Pennsylvania by positioning and empowering Pennsylvanians, their families and their businesses to succeed,” Senate Pro Tempore Kim Ward (R-Westmoreland) said in a statement. “Not only did the Senate Republican Caucus lead the way in helping to provide relief for families by establishing the Childcare Tax Credit, but we also increased it.”

Senate Majority Leader Joe Pittman (R-Indiana) said it was commonsense investment in the economy of Pennsylvania to return money to the taxpayers.

“Our point of view is if we’re going to invest $3 billion, we should invest it back into the taxpayers,” Pittman said. “We fundamentally believe when you allow taxpayers and consumers of electricity to keep more of what they earn, they can best decide how to reinvest that into our economy. Lower tax structures help to further grow an economy, and in this case, would lift all boats.”

Approved with a 36 to 14 vote, the proposal would cut the PIT rate from 3.07 % to 2.8% and eliminate the Gross Receipts Tax (GRT) on electric energy sales, effective Jan. 1, 2025.

PMA President & CEO David N. Taylor said the proposed reduction in the PIT rate and elimination of GRT on electricity bills was an effective counterpoint to the Shapiro Administration’s never-ending plans for new and higher spending.

“While opinions may differ on which tax improvements have the best effects on economic growth, there is no doubt that any tax relief is superior to the relentless climb in state government spending,” Taylor said. “For as long as anyone can remember, Harrisburg has been spending money faster than the taxpayers can earn it, which suffocates growth. It’s much better for state government to have mercy on the taxpayers and reduce its bite out of the private economy.”

In contrast, Shapiro’s plan would shrink the state’s cash reserve from $14 billion to $11 billion, and the recurring government spending will put the state on a path to completely drain the surplus within a few short years.

The surplus began accumulating during the COVID-19 pandemic when billions in federal tax dollars were allocated to the states.

Recent research by the Tax Foundation, “Can States Afford their Recent Tax Cuts,” bears out the strength of the Senate Republican plan.

“Tax revenues remain substantially above pre-pandemic totals, even adjusting for high rates of inflation,” the March 28 study said. “And notably, tax revenues have risen more in states that cut taxes than those that haven’t. The 27 states that cut the rate of a major tax (individual income, corporate income, or sales tax) experienced a 9.8 percent tax revenue increase in real terms between calendar years 2019 and 2023, while states that didn’t cut any of these taxes—or, in a few cases, increased them—saw tax revenues grow by 6.2 percent.”

“We shouldn’t take this too far, naively asserting that tax cuts paid for themselves,” the study added. “But we should also acknowledge that states that have prioritized tax competitiveness have done better than their status quo peers.”

The budget deadline for the 2024-24 fiscal year is June 30, and Ward promised that throughout the budget negotiations they will continue to “prioritize Pennsylvania families starting with a $3 billion tax cut.”

“We also set Pennsylvania businesses up to stay, grow and establish themselves in the state by reducing the corporate net income tax from one of the highest rates in the nation to the lowest,” she said.