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Pa. House, Senate approve new, higher taxes in $1.3B revenue deal

| Wednesday, July 13, 2016, 2:15 p.m.
Senate Majority Leader Jake Corman (second from right), R-Centre, and other top state lawmakers sign tax legislation Wednesday, July 13, 2016, in Harrisburg.
Senate Majority Leader Jake Corman (second from right), R-Centre, and other top state lawmakers sign tax legislation Wednesday, July 13, 2016, in Harrisburg.
State House Democratic Leader Frank Dermody, D-Allegheny, talks to the media after a meeting on how to fund Pennsylvania's $31.5 billion spending plan Wednesday, July 13, 2016, in Harrisburg.
State House Democratic Leader Frank Dermody, D-Allegheny, talks to the media after a meeting on how to fund Pennsylvania's $31.5 billion spending plan Wednesday, July 13, 2016, in Harrisburg.

HARRISBURG — Democratic Gov. Tom Wolf on Wednesday signed a $1.3 billion revenue bill that completes the 2016-17 budget and imposes higher taxes on cigarettes, smokeless tobacco and, for the first time, on digital downloads for videos, books and music.

The Republican-controlled House approved the bill by a 116-75 margin. Without debate, the Senate — also controlled by the GOP — approved it 28-22. Wolf later tweeted that he “just signed the revenue package.”

The revenue bill is intended to provide enough funding to balance the $31.5 billion budget.

Given Republicans' staunch opposition to higher taxes last year and in previous sessions, 48 GOP House members supporting the tax package represented a “sea change,” said G. Terry Madonna, a political science professor at Franklin and Marshall College. The Republican House members joined 68 Democrats to vote for it. In the Senate, 14 Republican senators were among the 28 votes for the bill.

Republicans worked with Wolf and House Democrats in large part to avoid a repeat of last year when the state budget was delayed nine months, said Rep. Bill Adolph, R-Delaware County. It's also an election year for most lawmakers.

The “passage of a revenue package means that we avoid another lengthy impasse, our budget is balanced this year and we have greatly reduced the commonwealth's structural budget deficit,” Wolf said.

“They were under enormous pressure back home not to repeat last year,” Madonna said. Wolf was feeling the heat, too, he said.

It became easier for Republicans to approve tax increases once Wolf took broad-based sales and income tax boosts the GOP fought against last year out of negotiations, Madonna said. Instead, lawmakers approved “niche taxes,” he said.

Western Pennsylvania Republicans who voted for the package included House Speaker Mike Turzai, R-Marshall; House Majority Leader Dave Reed, R-Indiana; Rep. Hal English, R-Hampton; Rep. Jim Marshall, R-Beaver County; Rep. Mark Mustio, R-Moon; Rep. Jeffrey Pyle, R-Ford City; and Rep. George Dunbar, R-Westmoreland.

In the Senate, Sen. Randy Vulakovich, R-Shaler, and Sen. Don White, R-Indiana County, were among the “yes” votes.

Vulakovich called it the “art of compromise with a Democratic governor.”

“I think everyone realizes we have a deficit,” he said. Costs for pensions and Medicaid continue to rise, and “our revenues aren't growing.”

“I don't like putting up a vote for it, but sometimes you've got to lead,” he said.

Wolf allowed the $31.5 billion budget to become law without his signature last weekend despite the lack of revenue to fund it. He expressed confidence in a new, bipartisan spirit after the 2015 impasse that overlapped through this year.

The tax increase “only satisfies the insatiable appetite of Wolf and the government beast in the Capitol,” said Rep. Daryl Metcalfe, R-Cranberry. The bill originally contained only a change to a corporate tax form but was widened to include myriad taxes, Metcalfe said.

A House summary showed the package includes a $1-per-pack tax increase on cigarettes, to $2.60 per pack; higher taxes on banks; and an extension of the state's 6 percent sales tax to digital downloads of music and videos. Digital downloads will include photographs, games and apps. Items that are exempt from the sales tax, such as newspapers, would not be taxed if downloaded in a digital format, said Paula Knudsen, an attorney for the Pennsylvania Newspaper Association.

Other features of the package:

• The tobacco tax will include electronic cigarettes. Cigars are exempt.

• Lottery winnings will be subject to the state's 3.07 percent personal income tax.

• Table games in casinos will be taxed at a rate ranging from 14 to 16 percent.

• Legalizing online gambling is counted on for $100 million.

Other revenue is expected to come from prior legislative action to boost wine and liquor sales through expanded hours and locations. The so-called liquor modernization bill brings in the most revenue of any measure in the package with $149 million in 2016-17, a House analysis showed.

Wolf touted the revenue plan as helping to provide $200 million in additional annual revenue for basic education.

But Rep. Rick Saccone, R-Elizabeth, said the state effectively is taking a “loan” from a medical malpractice fund with a surplus to pay for it.

“This is the definition of fiscal irresponsibility,” he said.

He said he doubts the “loan” will be repaid.

Brad Bumsted is the Tribune-Review's state Capitol reporter. Reach him at 717-787-1405.

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