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Pennsylvania

'Tax hike' not in Pennsylvania lawmakers' vocabulary

| Monday, Feb. 15, 2010

HARRISBURG — With another multibillion-dollar deficit thought to be around the bend for state government, many might think legislators would be looking at a tax increase.

But the only person talking openly about it is not running for re-election: Gov. Ed Rendell.

Voters will fill 228 of 253 seats in the Legislature in November's general election, and most legislators would rather talk about creating jobs. Polls show jobs and the economy are widespread concerns among voters.

Pennsylvania's rate of job losses has moderated, but the lack of hiring is troubling, and the state is recovering more slowly than the most fortunate states, said economist Ryan Sweet of Moody's Economy.com.

"Given the troubles in the labor market, consumers being conservative in spending, all indications are that this will be another difficult year for state revenues," Sweet said. "Even the next fiscal year, because employment will be slow to recover in Pennsylvania, you'd expect another difficult year for revenues."

Republican leaders are talking about cutting state spending and trying to help the private sector create jobs. Democratic leaders are talking about using state programs, such as job training or low-interest loans, to help the jobless get employment and encourage employers to hire.

Rendell, the second-term Democrat who cannot by law run for a third term, says his concern is about the future.

Under the governor's plan, none of the new money could be spent until after the end of the 2010-11 fiscal year covered by the budget he delivered last week to the Legislature. In it, he proposed pooling money from several new sources to help meet a projected $5.6 billion gap in 2011 and 2012 resulting from spiraling public pension costs and the expiration of federal stimulus budget aid.

The broadest of those sources is a plan to restructure the state sales tax, the state's second-biggest money source. Rendell would lower the rate to 4 percent from 6 percent but would eliminate exemptions on transactions on 74 goods and services, including lawyers' fees, electric bills and personal hygiene products.

Such a plan would add more than $850 million a year to the state's treasury, while leaving exemptions on groceries, clothing and prescription drugs. Also, Rendell argues, it would bring fairness to a major tax riddled with exemptions that defy logic and attest to the influence of special interests.

Minutes after the governor rolled out the proposal, however, Senate President Joe Scarnati, R-Jefferson, called it "dead on arrival." Democratic leaders did not endorse Rendell's plan, saying it was just the beginning of the discussion.

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