Tuesday, December 15, 2015

Pennsylvania Liberal Democratic Governor Tom Wolf Proposes a $1.2 Billion Tax Increase

          Pennsylvania Democratic Governor Tom Wolf, the most liberal state chief executive in the United States, has proposed a tax increase of $1.2 billion to balance the budget and pay for his spending spree, which is an even larger tax increase than the one rejected by the General Assembly last month.  See my post from then: Proposed Pennsylvania State Budget Tax Increase: http://williamcinfici.blogspot.com/2015/11/proposed-pennsylvania-state-budget-tax.html.

            The Commonwealth’s 2015 budget is nearly six months late, after Wolf had vetoed a balanced budget approved by the Republican-led legislature that did not raise taxes and then he even vetoed a stop-gap bill.  He also opted not to exercise his line-item veto authority and sign the rest of the budget into law.  The late budget has created a crisis for Pennsylvania’s counties, municipalities and school districts that are dependent on state money.

            The Senate recently approved Wolf’s latest proposed budget, despite the lack of any specific plan on how to levy the tax increase, whether by income, sales or excise taxes.  Much of the budget and companion bills were passed with little legislative or public review, a process now taking place in the House of Representatives while under pressure from the Wolf Administration to end the crisis immediately.  The Administration now blames the House for the crisis, which is a tacit acknowledgement that he was the culprit for the first five-plus months.

Wolf’s proposed budget raises spending by hundreds of millions of dollars more than his previous budget proposal, including for more pork.  In exchange for the tax and spending increases, in addition to the modest, but critical pension reforms outlined in the previous proposed budget, there would be minimal privatization and liberalization of the alcohol market. 

However, there are some technical pension problems that would cause the state’s pension funds to be underfunded by hundreds of millions of dollars and a lack of an otherwise legally-required actual note.  Also, the Commonwealth would retain its wholesale alcohol monopoly, which means all alcohol must continue to be purchased from the Commonwealth while most of its retail monopoly would remain, as no state stores would be sold or privately licensed.  Only those few supermarkets with in-house dining areas that currently may sell non-takeout alcohol would be permitted to sell up to four bottles of wine to go, which means the total state monopoly on the takeout retail of liquor would remain, in addition to numerous other restrictions on the sale of wine and beer.  Pennsylvanians would continue to purchase alcohol across state lines, where there is more convenience and selection, as Pennsylvania would lose millions in revenue to bootlegging. 

There would be more than sufficient savings to balance the budget without any economically-harmful tax increase if there were adequate pension reform and a complete end to the state wholesale and retail monopoly on alcohol, as well as the elimination of pork and corporate welfare, both in terms of spending and special tax breaks.  Conservatives in the House were willing to accept some new spending above inflation and population growth for education, but are unwilling to raise taxes, especially without adequate pension reform and more alcohol privatization. 

Conservatives should continue to insist on a fiscally-responsible balanced budget that reduces spending and does not raise taxes.

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