Rare sales tax bump is key to Wolf's budget
HARRISBURG - Gov. Wolf wants to do what no governor has done since President Lyndon B. Johnson was in the White House: Raise the Pennsylvania sales tax.
HARRISBURG - Gov. Wolf wants to do what no governor has done since President Lyndon B. Johnson was in the White House: Raise the Pennsylvania sales tax.
Former Gov. Ed Rendell tried it twice. In 2010, he couldn't even get the state's Democratic-controlled House to go along.
Wolf's plan - presented in his budget address last week - goes even farther. Higher sales and income taxes would raise almost $4 billion toward property-tax relief.
The proposal calls for hiking the income tax from 3.07 percent to 3.7 percent and increasing the sales tax from 6 percent to 6.6 percent.
But the blueprint also would expand the tax base, making hundreds of additional items and dozens of services taxable.
Opponents call it "cradle to grave" taxation. Items from diapers to caskets - now exempt - would be swept into the taxable net.
Among them are candy, newspapers, and nonprescription drugs. Also subject to taxes under the plan are accountancy and legal services, home health-care service, and tickets to performing arts and sporting events.
Food, clothing, and prescription drugs would remain exempt.
Wolf's spokesman, Jeff Sheridan, defended the proposal as part of a "holistic" plan to reduce the middle-class tax burden.
"You can't look at the sales tax in a vacuum," Sheridan said. "The governor's tax plan, based on Republican ideas, includes historic levels of property-tax relief and investments in education."
The sales tax is a critical puzzle piece, he said, in a much larger plan to provide $4 billion in tax relief. On average, homeowners earning $100,000 would see a 16 percent overall reduction.
Philadelphians would see a reduction in the wage tax of 14 percent by 2020. The city's extra $2 per-pack cigarette tax would be eliminated, and there would be no hike in Philadelphia's 8 percent sales tax, Sheridan said.
Also, $88 million in property-tax relief would be directed to Philadelphia.
In New Jersey, the sales tax is 7 percent. Delaware has no sales tax.
That fact is not lost on State Rep. Bill Adolph, a Republican and chairman of the House Appropriations Committee who represents Delaware County. He says Pennsylvanians already flock to Delaware to shop.
"There are malls set up on I-95 at the first exit in Delaware, and many Pennsylvanians go down there and make purchases," he said.
Most far-reaching
Not since 1968 has a governor been able to persuade the legislature to increase the sales tax. Gov. Raymond P. Shafer, a Republican, pushed through an increase that bumped it from 5 percent to 6 percent.
Rendell, during his two terms, also tried to sell the legislature on a sales tax increase to secure a modest reduction in property taxes.
Wolf's plan is the most far-reaching in modern memory, longtime Capitol observers say.
He wants to see property taxes cut roughly in half - an average of $1,000 per household - and property taxes eliminated for 270,000 seniors as well as a rebate for renters who make less than $50,000.
House Democratic leaders - who have called sales tax hikes "regressive" for disproportionately hurting the poorest - support the Wolf tax package as a balanced approach that would reduce the overall tax burden for typical residents.
Complex proposal
Adolph says GOP lawmakers need to take a closer look at the specifics of the proposal and better understand the overall reduction rates and how money would be distributed.
"The proposal is quite complex," he said. "We have to see how it affects [residents'] pocketbooks, how it affects their school districts, and then legislators can make up their mind.
"It looks nice on the receiving end, but it's almost $5 billion in new taxes. Somebody's going to be paying for it."
Senate Republican leaders sent a letter late last week to the superintendents of the state's 500 school districts, describing the "extraordinary level of spending increases" in the Wolf plan and urging them not to use it in their forthcoming budgets.
Asked whether that was a wholesale rejection of the Wolf plan, a Senate GOP spokeswoman said it was more of a "cautionary measure" given the "rosy picture" the governor presented.
"Those were broad strokes in a plan that had a lot of moving parts," said the spokeswoman, Jennifer Kocher. "A lot of things have to happen. And if one thing doesn't happen, it's a domino effect and [the funding] won't be there."
She said Republicans want to support doing more for education but believe that starts with pension reform, and they feel Wolf's pension plan does not offer a permanent fix.
In his budget address, Wolf called out special interests, which he said had prevented expansion of the tax base in past sessions.
And, in a pitch to Republicans, Wolf said his proposal was similar to a GOP plan to swap out property taxes for increases in the sales and income taxes.
Only days later, the chorus of opposition from trade groups began.
Leading Age, a group representing nonprofit senior services, said applying a tax to nursing homes and assisted-living facilities would cost families thousands and would lead to higher Medicaid rolls.
The Pennsylvania Newsmedia Association, of which The Inquirer is a member, issued a swift broadside saying history was on its side. The newspapers' exemption dates to the 1756 Stamp Tax imposed by the British, the group said.
That tax led to the American Revolution and provided the basis for First Amendment press freedoms under the U.S. Constitution.
Taxing Situation
Here are some of the notable items and services that would be taxed under Gov. Wolf's new plan:
Items
Candy and gum
Newspapers and magazines
Flags
Caskets and burial vaults
Metal bullion and investment coins
Racehorses
College meal plans and fees
Services provided for or by
Cable TV
Sporting events
Performing arts
Museums and historical sites
Amusement and recreation industries
Dry cleaning
Transportation
Home health care
Travel agents
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