PA House Passes Fiscally Responsible Budget
MAY 25, 2011 | by KATRINA CURRIE
Last night, the Pennsylvania House passed a $27.3 billion General Fund budget bill (HB 1485). The fiscally responsible proposal includes no new taxes, prioritizes resources and maintains the spending level proposed in Gov. Tom Corbett's budget (you can find differences between the proposals here). Holding spending to $27.3 billion represents a $700 million cut from the current year spending. More facts on the state budget here.
The bill now heads to the Senate for consideration, and is expected to return to the House for a final vote before June 30. Elected officials should adhere to this fiscally prudent path, resisting the temptation to overspend.
But some lawmakers seem more concerned about avoiding cuts than long-term fiscal stability. They argue every penny the state has for the General Fund should be spent. This position ignores the state's growing debt and pension obligations, and places more financial burdens on future generations.
Ask your legislators to stand strong for a budget that puts all taxpayers first.
Related : Budget & Spending, Pennsylvania State Budget
Are Tax Cuts Unfair?
NOVEMBER 22, 2010 | by NICHOLAS FETT
Congress continues to debate whether to extend the 2001 and 2003 tax cuts, to allow taxes to go up on everyone, or to raise taxes on just "the rich." Contrary to common conception, nearly eveyone received a tax cut, and is scheduled to see their income tax rate rise.
A video created for the Commonwealth Foundation's Please No More Taxes Contest explains the 'unfair' argument of tax cuts perfectly. Due to the highly progressive nature of our tax structure, spending cuts and therefore tax reductions benefit those who pay the most taxes.
Indeed, as the video shows—using soda instead of taxes—those that paid the most did the highest share of the "cut." Yet those who paid less actually saw a higher proportion of their own costs reduced.
Enjoy the video.
Related : Taxation
Time to End State Borrowing for "Economic Development"
NOVEMBER 16, 2010 | by NATHAN BENEFIELD
Fox 29 Philadelphia has a video story up about the use of RACP money—state borrowing for corporate welfare—for projects such as resort spas, sports stadiums, and Tasty Cakes (not to mention the Arlen Specter Library). The video features a couple cameos of yours truly.
RACP spending was brought up at yesterday's "Delivering on the Mandate" luncheon, with Rep. Mike Turzai saying it's time to do away with the program, which has only created more debt for taxpayers, without stimulating Pennsylvania's economy.
Related : Budget & Spending, Government Debt, Pork Spending, Corporate Welfare
Governor Rendell Earns a D on Fiscal Policy
SEPTEMBER 30, 2010 | by ELIZABETH STELLE
Cato's 2010 Fiscal Report Card on America's Governors is out. Not surprisingly, Pennsylvania ranks low. With a score of 40 points, Gov. Ed Rendell earns a D for his efforts to increase spending and taxes since 2008. Governor Rendell has supported many tax increases during his tenure, but in just the last two years we've helped to defeat many of his proposals, including:
- Increasing the income tax rate from 3.07% to 3.57%
- Broadening the sales tax base
- Broadening the corporate tax base
- And raising taxes on oil companies for transportation spending.
Joining Rendell in the D column is Beverly Perdue, governor of North Carolina, and Jan Brewer of Arizona. South Carolina's Governor Mark Sanford ranks 1st with a score of 74.
The complete rankings are available at Cato.org.
Related : Budget & Spending, Taxation
Fact Check: Severance Tax Proposal Would be Highest in US
SEPTEMBER 28, 2010 | by NATHAN BENEFIELD
SB 1155 would impose a severance tax rate of 39 cents per MCF. At the August estimated average wellhead price of $4.22 per MCF, this is an effective tax rate of 9.22%. This would be the highest severance tax in the nation.
| Severance Tax for Top Natural Gas Producing States |
|||||
| Top Natural Gas Producing States | State | Severance Tax on Natural Gas | Severance Tax Exemptions and Incentives for Unconventional Wells | Top Corporate Net Income Tax | State & Local Tax Burden As a Percentage of State Income (Rank) |
| 1 | Texas | 7.5% of market value | Rate reduction appr. 2% for up to 10 years | 0.00% | 8.4% (43) |
| 2 | Wyoming | 6% of taxable value (gross sales minus certain processing and transportation costs) | Gas transportation costs are significant and are subtracted from the taxable value | 0.00% | 7.0% (48) |
| 3 | Oklahoma | 7% plus 0.095% excise tax | Exempt from severance tax for four years or until gas production pays for the cost of the well | 6.00% | 9.8% (19) |
| 4 | New Mexico | 3.75% | 7.60% | 8.6% (39) | |
| 5 | Louisiana | $0.03 - 0.13 per MCF | Severance tax suspension on horizontally drilled well for 2 years or until payback | 8.00% | 8.4% (42) |
| 6 | Colorado | 2% to 5% based on gross income | Allows producers to deduct 87.5% of their property taxes paid to gov. from severance tax to state. | 4.63% | 9.0% (34) |
| 7 | Alaska | 25% to 50% net value | Reduction for all drilling in Cook Inlet basin and when gas is used instate; result minimal tax (appr. 1%). State also gives certain tax credits for exploration | 6.50% | 6.4% (50) |
| 8 | Utah | 3% - 5% | 6 months exemption for development wells | 5.00% | 9.6% (22) |
| 9 | Kansas | 8% on gross value severed from earth | There is 3.67% tax credit for ad valorem taxes paid, effectively reducing the severance tax to 4.33% | 7.05% | 9.6% (21) |
| 10 | California | Less than 0.01 per mcf | 8.84% | 10.5% (6) | |
| 11 | Alabama | 4-8% of gross value | 6.50% | 8.6% (38) | |
| 12 | Arkansas | 5% | 1.5% on new discovery wells for 24 months and on high cost wells for 36 months (can get extension) | 6.50% | 10.0% (14) |
| 13 | Michigan | 5% | 4.95% | 9.4% (27) | |
| 14 | West Virginia | 5% plus $0.047 per MCF | 8.50% | 9.3% (29) | |
| 15 | Pennsylvania | No Tax | 9.99% | 10.2% (11) | |
Read all of the Natural Gas: Myths & Facts at EnergyFactsPA.com.
Related : Environment & Energy, Taxation, Natural Gas
Where to Find Ideas to Balance the PA Budget
SEPTEMBER 27, 2010 | by NATHAN BENEFIELD
John Micek of the Morning Call has a piece today noting that the two candidates for Governor -- Dan Onorato and Tom Corbett -- have promised no, or few, new taxes, but will face a massive budget hole in January. And despite having promised to make serious spending reforms, neither are offering much in the way of details.
But being the good reporter that he is, Micek found the premier source of ideas for fixing the Pennsylvania state budget: the Commonwealth Foundation. Citing our report, A Taxpayer's Budget, Micek writes:
The think-tank claimed it could trim $1 billion from the state's $28 billion general fund budget; $2.21 billion from other operating funds and $926 million from the state's capital budget and other off-budget programs.
Doing any of that requires getting legislative approval, and just about everything the foundation proposed is a political sacred cow to someone. Group President Matthew Brouillette says the next governor simply must muster the political courage to push the reductions - and to get lawmakers to follow him.
Among the many cuts we proposed, Micek highlights prison reforms totalling $100 million in savings, and the elimination of prevailing wage laws on school construction projects, resulting in $400 million in annual savings.
For more ideas to balance the budget, visit http://www.commonwealthfoundation.org/budget
Related : Budget & Spending, Pennsylvania State Budget
The Specter Library is a Less Big Waste of Taxpayer Funds than Originally Indicated
SEPTEMBER 16, 2010 | by NATHAN BENEFIELD
John Micek points out that Arlen Specter is demanding that Tom Corbett, who criticized the Arlen Specter Library Project, get his facts straight. Specter claims the taxpayer-funded monument to himself will cost less than the borrowing originally authorized by the General Assembly.
The Commonwealth Foundation will heretofore accommodate Senator Specter's request. Instead of repeating "Pennsylvania is giving millions in borrowed funds to wasteful pork-barrel projects like $10 million for the Specter Library," we will now say "Pennsylvania is giving millions in borrowed funds to wasteful pork-barrel projects like $2 million for the Specter Library."
Here is a recent commentary I wrote on the real problem with the Specter Library.
Here is the Corbett ad in question:
Related : Budget & Spending, Pennsylvania State Budget, Government Debt, Pork Spending
Rendell Starts State Bailout of Cities
SEPTEMBER 13, 2010 | by NATHAN BENEFIELD
Yesterday, Gov. Rendell announced a $4.3 million bailout for the city of Harrisburg. The city, following decades of wasteful spending on things like a Wild West Museum and owning a minor league baseball team; taking on functions best left to the private sector, like parking garages; and with massive debt on the ill-conceived incinerator, is facing bankruptcy.
Rendell's brilliant strategy is to reward Harrisburg for its fiscal mismanagement -- and set the stage for future state bailouts of cities facing similar struggles, but not quite to the degree of Harrisburg yet, like Philadelphia, Pittsburgh, and Allentown.
Mr. Rendell, who leaves office in January, said this might not be the last time the state has to help one of its major cities.
"There are things the legislature and the next governor will have to do to help cities, not only Harrisburg," said Mr. Rendell, who pointed to recent financial difficulties in Philadelphia and Pittsburgh.
A spokesperson for the governor's office said the decision to help Harrisburg make its debt payments does not constitute an implicit guarantee to other cities in the state and each situation would be decided case-by-case.
Of course, the state has plenty of money to bail out city governments -- having itself been bailed out by the federal government twice in the last two years (indeed, about 10% of Pennsylvania's General Fund budget comes from stimulus or FMAP funds approved by Congress).
Nothing to worry about though, because after mayors lobby the state for more money, and governors lobby Congress for more money, the federal government will just seek a bailout from an entity with an inexhaustible supply of funds -- the American taxpayer.
Related : Budget & Spending, Pennsylvania State Budget, Government Debt, Great Cities
Why Lawmakers Don't (And Shouldn't) Raise Taxes
AUGUST 26, 2010 | by NATHAN BENEFIELD
Terry Madonna and Michael Young have a new column asking why Pennsylvania lawmakers are so loath to raise taxes:
This response differs dramatically from past practice. Throughout most of the 20th century, despite partisan differences, governors and legislatures raised taxes to balance state budgets during recessions. In just the last 25 years, for example, state leaders raised the income tax three times - 1983, 1991, and 2003 - to meet budget shortfalls. Indeed, the pattern of raising taxes to combat recessionary deficits was almost Pavlovian in its predictability.
But not this year! Despite perhaps the worst revenue shortfall in Pennsylvania's history, a tax increase is simply not in the cards.
The obvious question: What is different now?
Let me offer some quick answers to this question.
For starters, Pennsylvania's state and local tax burden is significantly higher today than it was in prior years. And while the 1983 income tax raise resulted in a lower rate a few years later, the 1991 and 2003 tax hikes have resulted in a PIT rate that is 46% higher than in 1990.
| Pennsylvania Tax Rates and Burdens Before Tax Hikes | |||
| Year | PIT Rate | State and Local Tax Burden | Tax Burden Rank |
| 1982 | 2.20% | 9.5% | 16 |
| 1990 | 2.10% | 9.8% | 24 |
| 2002 | 2.80% | 9.6% | 16 |
| 2009 | 3.07% | 10.2% | 11 |
| Sources: Tax Foundation, PA Department of Revenue | |||
Maybe lawmakers realize you can't just keep raising taxes indefinitely.
A second hypothesis is that lawmakers have seen the effect of these higher taxes. That is, Pennsylvania's growing tax burden resulted in stagnant economic growth. From 1991 to 2009, Pennsylvania ranks 42nd in job growth, 48th in personal income growth, and 47th in population growth among the 50 states.
A final possibility is that lawmakers recognize that our budget deficit is caused not by taxing too little, but by overspending. As Matt Mitchell of the Mercatus Center points out in a recent policy report, spending restraint by states is an untested policy. In fact, nearly every state with a budget deficit would have a surplus if they had merely grown spending to the rate of inflation plus population growth.
This is true in Pennsylvania -- even going back just to the start of the Rendell Administration. By growing the General Fund Budget from $20 billion to $28 billion, Gov. Rendell produced a 40% increase in spending, almost double the rate of inflation.
Related : Budget & Spending, Pennsylvania State Budget, Taxation
More on Philadelphia's "Blogger Tax"
AUGUST 25, 2010 | by NATHAN BENEFIELD
After we noted earlier this week Philadelphia's forcing of any blogger with blogging income to pay the city's business privilege license ($50/year or $300 for lifetime), several others have weighed in on the matter.
Reason Foundation notes this as another example of the misuse of occupation licensing:
Business and occupational licensing regulations are just another example of such coercive molestation. If governments truly want to help improve the economy, they can best do it by simply removing these barriers to work and entrepreneurship and allowing greater economic liberty to naturally lead to greater economic prosperity.
Jason Stverak of the Franklin Center posits that this fee may discourage citizen-reporters:
People tend to forget that bloggers are not all teenagers grumbling about their bad dates or conspiracy theorists railing against the government. The blogosphere is no longer just for ranters and ideologues. Increasingly, straight-shooting journalists cut from newsrooms are becoming online citizen journalists or forming non-profit online journalism organizations. These seasoned journalists-turned-bloggers will quit blogging if they are taxed on their meager profits.
Alex Charyna writes that this is just another money-grab from the city:
I think the city has a sound position. It’s not about free speech or liberty or whatever. It’s about money. Some blogs run as a business (very little, but some income), and the city isn’t business friendly. 50 years of a Democrat run city has led them to scrape the bottom of the bottom of the barrel for any possible source of income. That’s the message that needs to sent.
Business people (of all kinds) have no friends in City Hall.
Freedomworks echoes this sentiment, noting the rampant corruption and overspending in the City of Brotherly Love:
Philadelphia faces a budget crisis due to massive overspending by lawmakers on wasteful projects. In order to make up for their $179 million shortfall, Philadelphia’s government has proposed everything from steep soda taxes to property tax increases.
And Paul Jacob fears the business privilege license could indeed be used as a tool against free speech:
Philadelphia’s pursuit of imaginary scofflaws may amount to just an obtuse lunge for hitherto unextracted funds. But the new protocol is also a weapon that could be selectively deployed, now or later, to harass bloggers who publish inconvenient words. Wouldn’t be the first time in our history that the power to tax has been turned to such ends.
Related : Professional Licensing
