STATEMENT: On State House Revenue Plan

Marc Stier |

Update noon, October 18: There is talk around the Capitol that a shale tax will come out of the House Finance Committee today and coming to a vote on the House floor later this week. This legislation must be part of the budget this year. It is the difference between a budget that takes a step forward to address our long-term budget problems and one that makes those problems worse.

Marc Stier, director of the Pennsylvania Budget and Policy Center, released the following statement on the revenue plan passed by the Pennsylvania House of Representative last night:

“The tax code bill passed by the Pennsylvania House of Representatives last night is a white flag raised by the leaders of both parties, who are evidently willing to surrender to another year of make-believe budgeting rather than fight for a solution to the state’s persistent budget shortfalls.

“A shale tax, which would generate new revenues this year and growing revenues in the future, is not included. Instead, the plan relies on $665 million of one-time revenues that are dubious, for one reason or another. Transfers in the amount of $300 million from special funds can’t be repeated and may undercut important state programs. The plan includes $265 million from a gaming expansion bill that may not ever be passed and that would generate most of these funds from selling licenses for new gambling venues, which also can’t be repeated. And the bill again includes a one-time $200 million transfer from the Professional Liability Joint Underwriting Fund for medical malpractice insurance, which was blocked by the courts last year.

“Like other proposals to fund the budget, the House bill issues bonds based on state revenues, in this case from tobacco settlement revenues as proposed by the Senate rather than PLCB revenues as proposed recently by the governor. We see no advantage to using tobacco settlement rather than PLCB revenues for this purpose. Given the political difficulties of reaching a budget agreement that addresses the deficit accumulated last year, borrowing on the basis of future revenues is a bad idea whose time has come. But everyone should understand that this borrowing comes at the cost of deepening the structural budget deficit.

“The legislation does include one serious tax proposal, requiring third-party vendors who sell through internet marketplaces like Amazon and eBay to pay Pennsylvania’s sales tax. But, whether this brings in $30 or $40 or $50 million it is not nearly enough to address the state’s long-term structural deficit.

“The long-term structural deficit is a product, not of growing state spending, but of unwise cuts to corporate taxes. State spending as a share of the state’s gross domestic product (GDP) has been declining. But corporate tax cuts cost the state between $2 and $3 billion every year and have not yielded greater economic growth and job creation.

“The plan does, finally, provide the funds that could support a much-needed appropriation for state-related universities. But even at this late date, we don’t think that important goal justifies surrender to another budget that worsens the structural deficit. Given the political tensions in Harrisburg, we understand that compromise is necessary. But we need a compromise that advances towards the goal of sound budgeting, not one that retreats from that goal.

We urge the governor and Senate to reject this plan and tell the House to try again.”