HARRISBURG — The Republican-controlled House has defeated Democratic Gov. Tom Wolf’s plan to raise taxes on workers and gas drillers to close the state’s budget deficit, put more money in classrooms and reduce local property taxes for some homeowners.
The 127-73 vote was issued at about 3:20 p.m. today, more than six hours after debate began in the legislative chamber.
The plan would have raised the personal income tax 16 percent. The extra money generated would have went to close $3.5 billion deficits this fiscal year and next fiscal year. It also would have been used to reduce or eliminate local property taxes and rent costs for more seniors, disabled adults, including veterans, starting in 2016-17.
The higher tax of 3.5 percent on extracted natural gas, plus another fee on the fuel, would have put another $400 million in the state education budget over the next two fiscal years, according to Wolf’s plan.
Wolf’s plan stood no chance in the House where Republicans, many deeply conservative, out number Democrats 119 to 84. Not all members voted; two Democrats were absent and one Republican was, too.
Although Wolf did not win the support of his entire caucus, the vote was closer than in May when all members of voted against his original and much larger tax proposals. The debate, however, remained the same Wednesday with Democrats saying Wolf’s new slimmed tax package would fix the state’s years-long money problems of not having enough tax revenue to pay for services and Republicans saying it still was too high and government needs to live within its means.
“There has been a lot of posturing up until now but everybody in this knows new revenues have to be part of the solution,” Rep. Joe Markosek, D-Allegheny, minority chairman of the Appropriations Committee, said early in the debate. “The last thing I want to do, the last thing any of us wants to do, is to raise taxes, but unfortunately it is the reality of our budget situation. Pennsylvania is in a fiscal mess.”
But the state citizens should not bear the brunt of fixing it by paying the governor’s higher personal income tax, said Rep. Bill Adolph, R-Delaware, the Appropriations Committee chairman. While the governor’s latest tax proposal is less than he unveiled in March, it is still unfair and the deficit can be closed through other means, he said.
“Ninety-five percent of the governor’s latest tax proposal will be paid by the working men and women of Pennsylvania, Adolph said. “It’s that simple.”
It was immediately unclear what Wolf’s next move will be.
The state has been without a budget since Wolf on June 30 vetoed the Republican-brokered $30.1 billion budget that did not raise taxes and closed the deficit by shifting money around various bank accounts and not pay some bills that are due.
Wolf could drop the income tax proposal as House Majority Leader Dave Reed, R-Indiana, has said he should if his plan is defeated and negotiate a new budget plan.
But it’s doubtful Republicans would agree on any additional tax on natural gas drillers, which currently pay an impact fee that has a as an effective tax rate of less than 2 percent.
During the debate, Adolph and several other lawmakers, including some Democrats, said gas drillers already are taxed via the impact fee.
“You can’t get water from a stone,” Adolph said.
Rep. Daryl Metcalfe, R-Butler, compared Wolf’s request to not raise taxes as much as he originally asked to a street mugger compromising on how much money he would steal from your pockets.
Rep. Chris Dush, R-Jefferson, said the gas tax would “kill the jobs and people” in his district who do not have Internet access and drive on dirt roads.
Everyone favors the lowest possible taxes, said Rep. Mark Cohen, D-Philadelphia. But when the state is facing a deficit and needs money to fund government services, there’s no way to pay for it without new revenue, he said.
“This budget right now has a structural shortfall; we all know it,” Cohen said. “The reality in governing consists with dealing with the world as it is, and in the world as it is, the programs needed to meet human needs in Pennsylvania cost money.”
With the odds stacked against him, Wolf could cave completely to Republican demands that he not raise any taxes and reduce government costs by selling the state liquor store system and reducing governments’ share of workers pension payments. The liquor and pension bills, which Wolf also vetoed, would not have added any additional money this fiscal year.
Wolf also could shut down state government by closing liquor stores, PennDOT drivers license centers, state parks and other non-essential services that fall under the executive branch. However, earlier in the week, Wolf said he had not thought about closing state facilities if he lost the vote.
A 2009 state court decision said state workers must be paid if they are going to work.
For months, Republicans argued that Wolf close services, thereby keep workers form work, and not violate the court ruling.
So far Wolf has opted to keep government functioning. At the same time, Wolf has withheld state and federal money from school districts, and county governments and nonprofits that provide the bulk of the social service programs for the state, leading to criticism from Republicans that he was playing favorites during the budget stalemate.
The rejected proposal did not include a higher sales tax and expanded list of taxable items, which Wolf had advocated for since March 3. In his new plan, Wolf also lowered his preferred hike on the state’s 3.07 percent personal income tax from his original request of 3.7 percent. And he dropped increases on tobacco products.
The defeated plan would have raised the income tax to 3.57 percent. The administration estimated that the income tax increase, effective Oct. 1, would generate an additional $1.4 billion in the fiscal year that started July 1 and ends June 30. An additional $2.1 billion would be raised in the fiscal year that starts July 1, 2016.
That would be more than enough money to cover the state’s anticipated deficit the Legislature’s Independent Fiscal Office says is caused by rising mandated costs for pensions, corrections, human services and debt payments for both years.
Not everyone would pay that higher income tax, however.
Wolf would let poorer families forgo paying any income tax. Under his plan, the tax forgiveness level would rise from $32,000 to $36,400 for a married couple with two children.
And Wolf would divert $400 million in the higher income tax proceeds to expand Pennsylvania’s Property Tax/Rent Rebate program for seniors 65 and older, widowers 50 and older, and disabled adults 18 and older.
Wolf proposed to cover more people starting in the 2017-18 fiscal year by raising the household eligibility income level from $35,000 to $55,000. Seniors also would be able to exclude half of their Social Security income from the calculation, potentially making the program more accessible to other seniors.
All told, Wolf estimates that 216,000 seniors and 31,000 households with disabled residents, including disabled veterans, would have their property taxes eliminated.
Wolf’s plan kept an existing impact fee on drilled wells, which has an effective tax rate of less than 2 percent. The proceeds go to local municipalities, primarily in the Marcellus Shale regions where drilling occurs.
On top of the impact fee, Wolf wants a 3.5 percent severance tax on the volume of gas extracted. He also wants to impose an additional 4.7-cent fee per thousand cubic feet of gas extracted.
Wolf estimates the higher gas tax would generate an additional $67 million by the end of the fiscal year and $389 million by the end of 2016-17. The money would have gone to schools.
Lehigh Valley area votes
Yes — Democrats Pete Schweyer Mike Schlossberg, Dan McNeil, all of Lehigh; and Steve Samuelson and Bob Freeman, both of Northampton
No — Republicans Gary Day, Julie Harhart, Ryan Mackenzie and Justin Simmons, all of Lehigh; Joe Emrick, Marcia Hahn, both of Northampton; Doyle Heffly, Carbon; Jerry Knowles, Schuylkill; David Maloney, Berks; Craig Staats and Marguerite Quinn, both Bucks; Marcy Toepel, Montgomery; and Rosemary Brown, Jack Rader Jr. and David Parker, all of Monroe.
This article was written by Steve Esack from The Morning Call and was legally licensed through the NewsCred publisher network.