Wolf boosts schools, juggles taxes
Governor Tom Wolf issued his proposed $29.9 billion budget for 2015-2016 recently with a focus on employment and education resolved through tax reform.
The tax section in particular will likely prove a challenge for the first-year governor to sell, as he proposes reducing pension capital and raising income and sales taxes to invest in property tax relief. Publications in Harrisburg and Pittsburgh report very little legislative support for such a shift in the tax policy.
To pay for property tax cuts, Wolf wishes to raise income taxes from 3.07 percent to 3.7 percent and sales tax from 6 to 6.6 percent. Taxes on cigarettes will increase by $1 and other tobacco products would now also be taxed.
Meanwhile, on education, Wolf calls for a massive $400 million increase over last year's education funding by taxing natural gas operations as other states have done for years.
The budget is the first phase of a four-year goal to increase pre-K-12 investment by $2 billion, citing successful, thriving students as a foundation for a similarly thriving commonwealth. Wolf wants the state's education funding to match or exceed that of local communities.
Additionally, Wolf wants funding reform for charter and cyber charter schools, specifically recommending annual audits of cyber charter schools and requiring they reimburse supporting school districts' funds collected but not spent on students.
State Rep. Ryan Mackenzie, R-134th, said the governor's budget proposal is "hit and miss."
Mackenzie said lawmakers have until June 30 to enact a new state budget. The task won't be easy. Mackenzie said "according to the latest figures from the Independent Fiscal Office, the Commonwealth faces a projected budget shortfall of $1.5 billion. While steep, this number is actually an improvement over previous forecasts.
"Complicating matters is the return of divided government to Harrisburg, with Republicans holding historic majorities in the General Assembly and Democrats wielding power in the executive branch. As I have stated before, this offers a unique opportunity to set aside differences on lesser policy objectives and to focus more intently on our core priorities, namely improving our jobs climate, strengthening education, helping our state's most vulnerable citizens and protecting taxpayers.
"In early March, Gov. Tom Wolf laid out the parameters of what he hopes the budget will look like. In my opinion, he got some things right, but he also got some very important things wrong."
Mackenzie said the governor is pushing to close corporate tax loopholes and reduce tax rates on businesses that create jobs, which he views as a positive. "These are important steps in making Pennsylvania a more attractive place for job creators to locate and expand."
Mackenzie said the governor's plan does not protect taxpayers.
"The governor's plan would increase the personal income tax on all Pennsylvanians by 20 percent, from the current 3.07 percent to 3.70 percent," Mackenzie said. "Additionally, Wolf proposes to raise the sales tax. He would also expand sales taxes to goods and services that are currently exempt from taxation, including such items as assisted living services, college dormitory meal plans and funerals - just to name a few.
"All of this new taxation would be used to grow state government spending by 16 percent, or nearly 10 times the rate of inflation. This would represent an increase of $4.7 billion in new spending during his first year in office. The average Pennsylvania family of four would see its overall tax burden increase by slightly more than $1,400 a year under his plan. This is the wrong direction for Pennsylvania," Mackenzie said
"Governor Wolf opened the dialogue for the new budget and provided good starting points to hopefully get Pennsylvania moving in a positive direction and generate discussions that will reinvigorate opportunities for the middle class and our economic climate," State Rep. Daniel McNeill, D-133rd, said.
"I am supportive of efforts to provide proposed property tax relief that will benefit seniors and hardworking families and allow more families to consider purchasing homes.
"Reinvesting in education and improving funding to Pennsylvania schools will help better prepare our children for the jobs of the future. I am excited to see investment at all levels of the state's education system."
McNeill said he is also supportive of Wolf's efforts to increase the state's minimum wage to provide a livable wage for Pennsylvania's hardworking low wage earners.
"I look forward to being a part of the ongoing discussion as we create a budget that will strengthen our state."
State Rep. Gary Day, R-187th, commented on Wolf's proposed school property tax reduction plan.
"According to the governor's proposed budget, the Personal Income Tax would rise by 21 percent to 3.70 percent and the Sales and Use Tax would be increased from 6.0 percent to 6.6 percent – a 40 percent increase that would also remove several exemptions, such as diapers, day care services, headstones and caskets.
"A property tax reduction plan is never an elimination plan," Day said. "Your administration calls it a school property tax reduction plan, making it sound like a good thing for taxpayers, when in fact, it uses components of the elimination idea to raise taxes on Pennsylvanians. That hurts credibility and your mission to help children in Pennsylvania."
Day cited House Appropriations statistics showing of the 500 school districts in Pennsylvania, residents in 404 school districts would pay more in higher taxes than receiving in property tax relief. In the 187th District, which Day represents, all taxpayers will pay more.
"If we add up these tax increases, taxpayers are paying $6.3 billion more, and then when subtracting promised tax relief of $3.6 billion, we end up with a net tax hike of $2.7 billion – about a 10 percent overall tax hike, just on what the governor calls a tax reduction plan," Day explained. "Gov. Wolf's proposed tax hikes represent exactly what I believe I'm here to stop."
State Rep. Mike Schlossberg, D-132nd, said Wolf's plan is "a bold and promising start.
"The past four years have been an abysmal failure for our state... Tom Wolf came to office understanding that the previous administration kicked the can down the road too many times, and he acknowledges the need for change. Last summer I said we would have a fiscal day of reckoning in 2015 because it is simply fiscally irresponsible to continue on the path we are on. I have always believed that fiscal responsibility is more than just not spending; it's being able to invest in the future.
"Governor Wolf's plan does just that...I also commend the governor for addressing real property tax reform, as the previous administration's refusal to properly fund education has placed an increased burden on homeowners and small-business owners.
"I look forward to closely reviewing this budget... However, I will say that it's madness to think that we can cut or sell our way out of the $2.3 billion budget deficit Tom Corbett created...This budget is a good first step to correcting these problems, and I look forward to restoring Pennsylvania's greatness."