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Pennsylvania lawmakers considering tax on digital downloads

| Tuesday, July 12, 2016, 3:48 p.m.

HARRISBURG — Applying the state sales tax to digital downloads — potentially on purchases from music to movies — is among the revenue sources legislative budget negotiators and Gov. Tom Wolf are discussing, GOP lawmakers and staff said Tuesday.

It's part of a last-ditch effort to come up with $1.3 billion in additional revenue to pay for a $31.5 billion budget approved June 30 before lawmakers leave the capital for the summer. Votes are possible Wednesday. The state's bond ratings are at risk if a deal falls through.

House Majority Leader Dave Reed, R-Indiana County, said “a lot of progress has been made” on a revenue package, but he declined to detail what's in the package under consideration. A top Senate Republican says a tax package to fund the $31.5 billion election-year spending plan is nearing readiness.

Senate Appropriations Chairman Patrick Browne said Tuesday that the $1.3 billion package will include a $1 per-pack tax increase on cigarettes, to $2.60 per pack. It will include higher taxes on banks, extending the state's 6 percent sales tax to digital downloads of music and videos and extending wholesale taxes to smokeless tobacco and electronic cigarettes.

Whether it wins approval remains unclear. A strong conservative faction in the House blew up a tax agreement with Wolf last December.

“It's back to House Republicans again,” said Christopher Borick, a political science professor at Muhlenberg College. “How many times do we talk about broken records?”

“I'm hoping they can't cut a deal, we can go home and come back in the fall,” said Rep. Rick Saccone, R-Elizabeth. He says the state should spend only the revenue currently raised.

“The decision by our leadership to work with Wolf and the Democrats certainly violates the trust put in them by most members of our caucus,” said Rep. Daryl Metcalfe, R-Cranberry. “This is not the path Republicans expected them to take” when electing historic GOP majorities in 2014, Metcalfe said.

Catered dinners were brought in for legislators Tuesday night, including dozens of pizzas for House members as they met behind closed doors to study the proposal.

Another provision being considered: increasing the tax on table games in casinos from 12 percent to 14 percent, said gambling lobbyists and legislative staffers.

The 2016-17 budget was approved by the June 30 deadline set in state law, but critics said it was irresponsible to pass a budget without enough money to pay for it. The budget increases basic education spending by $200 million a year. It boosts spending by $1.4 billion, or about 5 percent.

“I do not have details of what is being discussed,” said Jeffrey Sheridan, a spokesman for Wolf, a York County Democrat. “I can tell you that conversations have been ongoing throughout the day to work toward reaching an agreement.”

The income and sales tax increases Wolf sought last year were dead on arrival in the Legislature. A gross receipts tax on natural gas customers, part of earlier discussions, was a “non-starter” in the House, Reed said.

Under the proposal being considered, Internet gambling and expanded liquor sales tax would help pay for the budget increases and mandated spending.

“There's no surprises” in the revenue package being negotiated, said Jennifer Kocher, spokeswoman for Senate Majority Leader Jake Corman, R-Centre County. “Everything in it has been talked about before,” she said.

The digital download tax proposal “has been under discussion for a while,” she said.

Exactly what might be included in a final version was not available in writing.

Wolf let the budget become law without his signature, despite complaints that enacting a budget without enough revenue to pay for it might be unconstitutional.

The House ended its voting session Tuesday amid closed-door wrangling over hundreds of pages of budget-related legislation and open disputes about Republican efforts to pave the way for more charter school slots in the cash-strapped Philadelphia School District.

The Associated Press contributed. Brad Bumsted is the Tribune-Review's state Capitol reporter. Reach him at 717-787-1405 and bbumsted@tribweb.com.

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