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'Time for bold change,' Wolf says in outlining $30B state budget

| Tuesday, March 3, 2015, 3:24 p.m.
Gov. Tom Wolf delivers his budget address for the 2015-16 fiscal year to a joint session of the Pennsylvania House and Senate on Tuesday, March 3, 2015, in Harrisburg.
“It’s time for bold change,” Gov. Tom Wolf tells a joint session of the state House and Senate in March. His $30 billion budget would raise income and sales taxes but cut property taxes, bridge a $2.3 billion deficit and increase education funding. The House unanimously rejected the proposal on Monday, June 1, 2015.

HARRISBURG — Gov. Tom Wolf on Tuesday proposed a more than $30 billion state budget built on a wide-ranging tax restructuring plan that could, if enacted, become the largest tax hike in Pennsylvania history but significantly cut the school property tax.

“It's time for bold change,” Wolf said of his plan to eliminate a $2.3 billion deficit by increasing the personal income tax, sales tax, natural gas extraction tax and the tax on tobacco products. His spending plan emphasizes putting money into education.

Skeptical Republicans, who control the General Assembly, said they would evaluate his proposals for the 2015-16 fiscal year, which begins July 1.

“This budget proposal calls for historic spending, an increase of 16 percent over this fiscal year, with the potential to be the largest tax increase in commonwealth history,” said House Majority Leader David Reed of Indiana County.

“Taxes, taxes and more taxes,” said Sen. Camera Bartolotta, R-Washington County. “If my business followed this same methodology, I would have found myself on the fast track to bankruptcy court.” She said the tax on gas drillers “is an extremely disappointing policy position that is rooted in political ideology, not pragmatism.”

Democrats praised Wolf's plan as “responsible and necessary.”

“The governor deserves credit for proposing an aggressive approach aimed at solving Pennsylvania's most pressing problems,” said Senate Democratic Leader Jay Costa of Forest Hills. “It is bold, it is responsible, and it is necessary in light of the structural deficit that exceeds $2 billion, the gaping education funding hole and jobs deficit that Pennsylvania faces.”

Reed and other Republicans put the budget's bottom line at $33.8 billion, not $30 billion as Wolf outlined, with a $5 billion spending increase.

Wolf didn't count transfers of $2.1 billion to a property tax fund and $1.7 billion for school employees' retirement, said Senate Majority Leader Jake Corman of Centre County.

Wolf's budget would raise the state income tax from 3.07 percent to 3.7 percent and increase the sales tax to 6.6 percent — 7.6 percent in Allegheny County. It would eliminate the sales tax exemption for 45 items, although food, clothing and prescription drugs would remain exempt. Items that would be taxed include newspapers, non-prescription drugs, flags, caskets and burial vaults, day care and nursing home care, textbooks, and a number of personal and professional services.

“Will you pay (more) eventually to bury a loved one?” Corman said.

Wolf's plan would raise $4.6 billion in new revenue. About $2.1 billion of that would go toward property tax cuts; the rest would cover the deficit and boost education spending. He would halve the corporate net income tax in two years, and phase out the capital stock and franchise tax on business assets by Jan. 1.

His gas severance tax would “restore funding for schools,” and he would increase the cigarette tax by $1 per pack and tax other tobacco products.

Corman said the budget is a non-starter in the Senate unless Wolf embraces “structural issues” causing soaring costs in the state's pension system.

“With a broad and sweeping plan like Gov. Wolf has laid out, you have to be cautious in terms of expectations,” said Christopher Borick, a political science professor at Muhlenberg College in Allentown. Pennsylvania is a state of “incremental change,” he said.

House Minority Leader Frank Dermody, D-Oakmont, said Wolf's plan aims to fix problems inherited from his predecessor, Republican Tom Corbett.

“There's no way to sugarcoat it — the past four years were a disaster for Pennsylvania,” Dermody said. “It was four years of policy based on outdated and ineffective ideology and budgets based on one-time gimmicks and unrealistic expectations.”

Wolf said his intent is to “rebuild the middle class in Pennsylvania, and that starts with three priorities: jobs that pay, schools that teach, and government that works.” He acknowledged that not everyone would agree with his ideas but said he welcomed support “from Republican and Democratic colleagues.”

Property tax cuts would mean more than $1,000 in relief for the average homeowner, said Budget Secretary Randy Albright. It would mean a 13 percent cut for home­owners, counting increases they might pay in income and sales taxes, Albright said.

But Sen. Kim Ward, R-Hempfield, said that unless lawmakers eliminate property taxes, there's no guarantee they won't increase later, when taxpayers would be paying higher sales and income taxes. Ward said Wolf provided no guarantee that every dollar of new revenue would help reduce property taxes.

Wolf's spokesman Jeffrey Sheridan insisted otherwise.

Wolf said his plan “dramatically invests in schools that have been devastated by cuts, to prepare our kids for middle-class jobs. It cuts taxes to attract companies that will create jobs that pay middle-class wages. It streamlines bureaucracy and cuts red tape to create a government that works.”

The budget would invest $1 billion in K-12 education and higher education.

Overall, he proposed a four-year commitment to invest $2 billion in basic education, special education and early learning.

“This budget increases our investment in public schools at every grade level,” Wolf said.

Brad Bumsted is Trib Total Media's state Capitol reporter. Reach him at 717-787-1405 or bbumsted@tribweb.com.

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