The dust has settled on the 2016-17 budget debate—at least for the moment.
Some people hail the agreement as an example of what Harrisburg can accomplish when two parties work together. Others defend it as an improvement over previous budgets and the least bad option under the circumstances.
These conclusions miss the mark. In the budget battles to come, taxpayers deserve better policies and a more deliberative process to govern how lawmakers collect and spend their hard-earned dollars.
Policy
Lawmakers drove up spending by $1.6 billion and raised taxes by $650 million to pay for a massive increase in the size and scope of government. Such a policy decision will have painful consequences for the Pennsylvanians working every day to make ends meet.
Part of the $650 million tax package includes a 40 percent excise tax on e-cigarettes. This punitive tax will force some small business owners to close their doors. Wallace McKelvey of PennLive featured one of those business owners, Chris Hughes, in his story about the costs of higher taxes:
Hughes, whose Lycoming County shop currently has three employees, said he plans to sell off his inventory and close the store before the end of September. Like many owners, he said, he doesn't have the cash reserves to make a lump-sum payment to the state.
While e-cigarette shops across the state prepare to close, and residents—especially low-and middle-income residents—prepare to pay more for cigarettes, select businesses will soon have a bigger pool of special subsidies to draw from. According to Eric Holmberg of PublicSource, lawmakers increased the number of available tax credit subsidies by more than $100 million starting next year.
With the stroke of a pen, government can put people out of business and lavish others with special privileges simultaneously. It's not fair and it's not effective. The ad hoc method of economic development employed by the state has not succeeded and will only further alienate those who feel government should not be picking winners and losers.
Process
Lawmakers’ unwillingness to control spending and protect working people from tax increases wasn’t the only disappointing aspect of this budget cycle.
The process leading up to the passage of the $650 million tax increase was marred by a lack of transparency. Both the House and Senate suspended the rules that allow for adequate consideration of the legislation. Consequently, the 267-page tax bill passed less than three hours after it was introduced. There was little time to review and debate it.
Some of the tax bill’s provisions are just now coming to light, including a handout to Allentown businesses, a bailout of Philadelphia’s cigarette tax fund and a permanent extension of the tax itself. Again, no debate over the merits of these policies.
During the midst of the budget impasse, I made the point that it’s not enough to get the budget done. Lawmakers had to get it right. This year, too many lawmakers opted for the former, giving us a budget of convenience rather than one of principle.
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