Helicopters, trout and burial caskets — those are three of the items Gov. Rendell proposed taxing in his budget address today.

As part of his plan to help cover rising pension costs and the loss of federal stimulus money, the governor wants to repeal 74 sales tax exemptions.

Though he wouldn’t institute taxes on essential items like food and clothing, Rendell argued for a new sense of rationality in the state tax code. Right now, he observed, moviegoers buy candy tax free but pay sales tax on popcorn.

To offset the increases, Rendell also proposed lowering the state sales tax rate from 6 percent to 4 percent.

After the jump, the full list of good and services that would be newly taxed if Rendell's proposal passed.

There are indeed some hilarious exemptions. Our personal favorite might be fish feed.

»  More Pennsylvania's hilarious tax exemptions

This morning, Gov. Ed Rendell unveiled his $29 billion budget proposal to a joint session of the Pennsylvania legislature. In the speech, he praised lawmakers for cutting spending to deal with last year's budget deficit. However, he warned, trouble lies ahead:

Are we out of the woods? Not by a long shot. Despite all of our efforts, we have a projected $525 million deficit in this year's budget that will once again impact all of the spending decisions we make. And while our unemployment numbers are better in Pennsylvania than in many other states, job creation is still sluggish at best, and personal income tax revenues are not meeting our projections.

To deal with the shortfall, Rendell called on the legislature to support changes to the state tax code. His proposal is to actually lower the state sales tax by two percentage points, but end exemptions for 86 non-essential items such as fruit juice and candy bars. If the legislature passes the proposal, it would generate about $1.4 billion in new revenue each year. Rendell wants that money put aside to help offset the loss of federal stimulus dollars.

I urge you to enact these changes this year, and put those funds into a newly created Stimulus Transition Reserve Fund that cannot be tapped until July 2011. This idea is similar to the Rainy Day Fund that was so successfully championed by former Governor Ridge and this Legislature, and the rationale is sensible: let us prepare today for storms to come.

Rendell also told the legislature that he would revive his plans to tax smokeless tobacco and companies drilling for natural gas in the Marcellus Shale region. Rendell argued that these two items are only free from taxation because of the big power of special interests in Harrisburg.

There is little rhyme or reason why we tax some items or services and wholly exempt others, except that in years past someone lobbied to secure favored treatment for themselves at the expense of others. As the Pennsylvania Budget and Policy Center pointed out last year, a simple trip to the movies "provides insight into the patchwork nature of Pennsylvania's sales tax. The rental of the movies by the theater, the admission ticket and candy and gum purchased at the counter are all exempt from taxation. (But) popcorn and soda purchased at the same counter are subject to sales tax."

The legislature has a constitutional deadline of June 30th to pass a state budget. However, last year's process was delayed by more than 100 days because of political infighting.

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A day before Snowmegeddon Part Two, area municipalities are turning to the feds for help covering their snow removal costs. Without it, towns might have to defer capital improvements, like construction projects.

The Patriot-News has a preview of Gov. Rendell’s budget address today. Though details are scant, Rendell is expected to ask for an increase in aid to state schools and will push for a tax on natural gas extraction.

During his mayoral campaign, Michael Nutter promised to increase opportunities for minorities and women in city jobs and contracting. Yesterday, he announced a plan to fulfill that promise by calling for women- and minority-owned firms to receive 25 percent of all city contracts.

With increasing health care costs one of the big problems on the horizon for big cities, the Inquirer profiled the team responsible for wringing savings out of police insurance by ferreting out fraud and encouraging healthy behavior.

Detroit is preparing to dispose of 92 underutilized parks. Some may be adopted by nonprofits or turned into urban farmland.

And finally, Congress is wrangling over whether and how much to extend unemployment benefits. About 12 million Americans are receiving the benefits, which have already been extended to 99 weeks, an all-time high, in the face of the recession.

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This morning, Gov. Ed Rendell will give his eighth and final budget address. The speech, which is scheduled to start at 10:30 am, will set the priorities for his last year in office. You can watch it live on the Pennsylvania Cable Network, if you're so inclined.

Below are three big questions about the budget that remain up in the air. Keep checking back for more analysis as the day goes on.

How long will the budget process take? Last year, the legislature passed a budget more than 100 days after the June 30th "deadline." State workers and agencies providing services under contract stopped getting paid. No one is eager for a repeat of that performance, so expect to hear a lot of talk of getting things done quickly.

Can Republicans and Democrats get along? The last process was delayed partially because of partisan politics. Both sides were eager to engage in petty fighting rather than tough decision making. We're now in an election year. Will the rhetoric intensify, or will legislators work together to avoid anti-incumbent sentiment?

How will Rendell propose to deal with the $450 million deficit? Although Pew ranks Pennsylvania as one of the most fiscally secure states in the country, Pennsylvania still has a deficit to deal with. The governor will probably propose two new taxes -- one on natural gas extraction and the other on smokeless tobacco -- to help handle the problem.

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Are you planning on using Joan Krajewski's amnesty? We want to hear your story. Get in touch at linderk@phillynews.com.

We’re all going to be hearing a lot in the coming months about Philly’s tax amnesty program, slated to run for 45 days beginning May 3. It will be the city’s first amnesty since 1986, and cost $12.6 million to promote and operate.

Councilwoman Joan Krajewski first explained the idea in a Daily News op-ed back in August. She told the story of a grandmother in her district who fell behind on property taxes and couldn’t afford to pay the principal plus all the interest and penalties she’s since accrued. Philadelphians, Krajewski wrote, need the relief.

Of course, the city also needs the money. The amnesty is expected to generate $25-30 million in revenue after costs, and right now, Philly is owed approximately $1.2 billion in back taxes.

Philly isn’t the first locale to turn to an amnesty in hopes of easing fiscal woes. Cities like Phoenix and Los Angeles and states like Arizona and New Jersey instituted effective tax amnesty programs in 2009. In her op-ed, Krajewski cited the success of New Jersey’s program, which brought in more than $700 million in two months. And in a letter to the Daily News, City Controller Alan Butkovitz endorsed the amnesty by arguing that other cities had benefited from similar programs.

It’s Our Money decided to look at the design of these other recent amnesties to see what we could learn about Philly’s. We found that Philly has, in some respects, modeled its amnesty similarly to other successful efforts. But we also noticed that, unlike some other locales, Philly’s amnesty doesn’t allow participants to use a payment plan. It’s the only amnesty of the ones we looked at that will forgive property tax debt. And a close look at the other amnesties raises questions about whether these amnesties are generally intended for grannies like the one Krajewski cites.  Details after the jump...

»  More How Philly’s amnesty compares to previous, successful amnesties

The role of money in politics has been on people's minds lately because of the Citizens United decision, and this weekend, the Inquirer had an interesting local case study of the dynamic at work. Councilman Bill Green, Patrick Kerkstra writes, is viewed as a reformer ... but he's raised a lot of money from big, "entrenched interest groups" and "veteran power brokers" ... but he has taken numerous stands that appear to threaten his donors' interests. For example, he's taken money from unions, but advocates a "paperless government" that could result in layoffs. Green says he answers to no one but himself and the public.

It seems to us that to evaluate whether a politician is really challenging his donors interests you'd have to ask two things: 1) Whether the donors view the politician's proposals as a realistic possibility or a gimmick to get votes -- talk is cheap, as they say; 2) Whether the politician is challenging the donors' fundamental interests. If you operated a widget factory, and also happened to like using the public library, you might be disappointed with a politician who advocated cutting library hours. But you might not withhold campaign contributions until he proposed a widget tax.

We're not sure where we think Kerkstra's examples about Green fall on this spectrum -- we'd have to know more about the paperless government idea etc. Just food for thought.

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Right before the snow storm hit, the Daily News reported that the battered city budget has another $100 million deficit that must be addressed this current fiscal year. (The gap could grow to $700 million by the end of five years.) According to Finance Director Rob Dubow, the city will be forced to make another round of tough choices.

"Whatever way you look at it, it's a significant number that raises really big challenges that shows that this process is going to be really difficult," Dubow said.

[snip]

Dubow said that the shortfall for the 2011 fiscal year, which starts July 1, is due to lower-than-expected wage-tax and sales-tax collections, as well as the cost of the recent police-arbitration award. The three other municipal contracts have not yet been resolved.

So how much money are we really talking about here? Out of a $3.8 billion budget, what can you buy for $100 million? Below are three examples of current spending to put the number into prospective.

More than the entire budget for parks, recreation, museums, and libraries. Last year, the city spent roughly $82 million to fund Fairmount Park, recreation centers, the Art Museum, and other cultural programs. The budget deficit is about 20 percent more than the total budget for all of these institutions.

Total budget of First Judicial District. Unlike every other county in Pennsylvania, Philadelphia is forced to pay for its entire local court system. The total budget of the First Judicial District was $99 million last year.

Half the cost of debt service. From capital projects to short-term cash flow, the city relies on a lot of debt to operate. Every year, taxpayers repay about $200 million to various banks and financial institutions. The current deficit is about half the total debt service.

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Assuming you’ve survived snowmageddon, the city now has a rough estimate of how much it cost to dig you out over the weekend. The city probably spent about what it cost to shovel us out of the December blizzard: $3.5 million and an additional $3.3 million for the airport, which has its own source of funding. Budget Director Steve Agostini said that Philadelphia might have to spend that much money again this week, as another storm is expected to hit.

In non-snow-related news the Inquirer published an analysis over the weekend of the upcoming state budget negotiations. Both Democrats and Republicans agree that the budget has to be passed on time this year. We’ll see.

Meanwhile, the Post-Gazette has learned that Gov. Rendell is going to propose an overhaul of the state sales tax. He wants to lower the rate to 5 percent, or even 4 percent, and eliminate sales tax exemptions to help cover looming pension obligations for government employees. The state sales tax rate is currently at 6 percent. Philadelphia imposes an additional 2 percentage points to that rate.

Some Pittsburghers are upset about changes made to a water fee meant to cover water and sewer line protection. Previously, customers had to opt in to receive insurance — now, they have to fill out a form to opt out.

Meanwhile, across the Delaware, Gov. Christie and state lawmakers are prepared to unveil a bipartisan plan to make sweeping changes to public employee pension and benefit plans. The state hopes to reduce costs by cutting benefits and increasing contributions, but unions say that the proposal would interfere with the collective bargaining process.

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Gov. Ed Rendell

Tomorrow, Gov. Ed Rendell will give his state budget address. The Daily News editorial board argues today that a tax on natural gas tax could be a relatively painless way to handle the deficit.

The easiest [issue] to deal with should be the natural-gas extraction tax. Last year, the governor proposed a tax on gas from the newly discovered wells in the Marcellus Shale region. The proposal would have generated $632 million over the course of five years, but Rendell scrapped the idea, saying he was worried about hurting an infant industry.

The editorial argues that this tax wouldn't harm our ability to compete, since a large of number of states already have a similar levy in place.

Consider what happened when the rights for drilling for natural gas in state forests were auctioned off. Officials expected to raise $64 million. Instead, gas companies coughed up $128.5 million. Clearly, these same companies can afford the tax.

The tax is not just important because of this year's budget deficit. It's also critical for dealing with some of the drawbacks of increased natural gas production.

The state will have to boost funding for environmental monitoring and safety protections for workers. Also, many of these mines will lead to economic development in rural communities. That's a good thing, but it also means that state and local government will have to invest in basic infrastructure like roads and sewers.

Some of the revenue should also be set aside to invest in building the state's green economy. We already have incentives for alternative energy companies. These could be expanded with a portion of the extraction-tax revenue. Ultimately, the state's energy sector should include natural gas, solar and wind.

Some of the money must also go to the general fund. In tough economic times, the state can't afford to turn away revenue from a new source. Most businesses are hurting right now and paying less in taxes. It's only fair that companies making big profits from drilling pay their fair share.

Last year, many in the legislature refused to consider any tax increase. That was a mistake. Clearly we need to tax this new industry. Lawmakers should do the right thing this year and pass a tax on natural gas extraction.

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