Tax hikes won’t fix the structural deficit. We just raised taxes last year, having a devastating impact on vape shops, and have raised taxes four times in the last eight years. Yet we still have a budget deficit.
Why? Spending has grown faster than our state economy. That’s simply unsustainable. Under Gov. Wolf, spending has grown by nearly $3 billion in just three years.
We owe about $1.5 billion to pay off last year’s bills—which many think the state should borrow money to pay off—because revenues were $1.1 billion short of estimates, and still Gov. Wolf spent $400 million more than the enacted budget.
Yet special interest groups and editorial boards (who forget that newspaper sales and newspaper advertising are exempt from the sales tax) keep demanding higher taxes on working families, on top of the proposed borrowing.
Worst Case Scenario: Borrowing AND Tax Hikes
Here’s what appears to be on the table in terms of tax hikes and other revenues (unfortunately, the list keeps growing):
- Another tax on natural gas drilling, an industry that has lost 14,000 jobs in the last two years.
- A natural gas tax gross receipts that will raise heating costs this winter on approximately 2.7 million homeowners.
- Higher taxes on electricity and telecoms.
- A likely illegal order on out-of-state online vendors to collect sales tax. (Amazon.com, and sellers with a nexus in Pennsylvania already do).
- A "promise" to pass gambling expansion (last year's budget also included a promise to expand gambling that went unfulfilled).
Best Case Scenario: Structural Reforms to Control Spending
Here are the transformative reforms we may actually be able to achieve this year:
- Reforming welfare, including work requirements for Medicaid recipients that have been shown to raise the incomes of those in poverty and help them transition to independence. Such a reform could save billions in costs, while increasing families incomes by tens of millions.
- Prioritizing spending from the $3 billion in other funds, including $250 million in horse racing subsidies, that are part of the “shadow budget.”
- Allowing private retailers to sell liquor to consumers, generating recurring revenues through license fees, and increased tax revenue by reducing border bleed.
- A school code with seniority reform to protect excellent teachers and expansion of the successful Educational Improvement Tax Credit serving thousands of students.
Pennsylvania families are tired of paying more year after year. They need real reforms to balance the budget in the short term and in the long run.
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