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Wolf's budget looks to be big, bold - and controversial

HARRISBURG - The details have been kept under lock and key, but when Gov. Wolf unveils his first budget early this week, all signs point to its being big, bold - and highly controversial.

HARRISBURG - The details have been kept under lock and key, but when Gov. Wolf unveils his first budget early this week, all signs point to its being big, bold - and highly controversial.

For days now, there has been chatter in political circles in the Capitol that Wolf's spending plan will propose aggressive increases in public education even while facing a $2 billion structural deficit and more than $1 billion in rising costs for pensions, corrections, and health care for the poor.

To pay for it all, the Democratic governor is eyeing a package of tax increases and new taxes at levels that haven't been seen in years, according to legislative and other sources who have been able to glean some of the budget's details.

The tax changes include hikes in the top two money generators for Pennsylvania: the personal income tax and the sales tax, the sources said.

In return, the administration is reportedly looking to dedicate a sizable chunk of that money to what some are calling an unprecedented and dramatic property tax relief proposal.

For his part, Wolf has been mum on those big-ticket proposals even as he has revealed other important pieces of his budget. Those include a new 5 percent tax on natural gas drilling and cutting the corporate net income tax in half.

Jeff Sheridan, a spokesman for Wolf, also declined to discuss details Friday, saying the governor's full spending plan would be revealed Tuesday, when he delivers his budget address to a joint session of the legislature.

"Some may look to take political shots or want to maintain the status quo," said Sheridan. "But Gov. Wolf knows we need a change if we are going to rebuild the middle class."

One thing is certain: Wolf's spending blueprint is expected to be a jarring departure from those advanced by his Republican predecessor, Tom Corbett. Corbett's first budget proposed a no-tax, "cut-first" approach that trimmed overall spending but sliced funding for public and higher education.

Another certainty: Wolf's plan will be met with resistance and skepticism in the Republican-dominated legislature.

"There is no way we can go into our caucus and advocate for that type of plan," top Senate lawyer Drew Crompton said of the talk swirling around Wolf's budget proposal.

Those who know him say Wolf, who brought his family's cabinet business back from bankruptcy, appears to be taking a CEO's route to deal-making with the legislature: Give some and get some.

In the last few weeks, Wolf has announced he will follow through on a campaign promise to impose a tax on Marcellus Shale gas drilling. That was not a popular topic with Senate Republicans, who, under Corbett, crafted the current impact fee on drillers.

The governor's gas tax proposal would replace the impact fee with a 5 percent tax plus a per-cubic-foot fee on gas to raise roughly $1 billion. That money would go toward funding public schools.

But the governor has also said he wants to halve the state's oft-maligned 9.99 percent corporate net income tax, which has GOP support.

That proposal, combined with Wolf's property tax relief plans, amounts to more than just throwing Republicans a bone. "It's throwing them whole carcasses," said Sen. Vincent Hughes of Philadelphia, the ranking Democrat on the powerful Senate Appropriations Committee.

Love it or hate it, Wolf's yet-to-be-announced property tax relief plan is getting the most attention.

Details were scant last week, but the administration is considering increasing the personal income tax from 3.07 percent to roughly 3.7 percent and hiking the sales tax from 6 percent to 6.6 percent, The Inquirer has learned.

While specific dollar amounts were not available for Wolf's plan, here is some perspective: Raising the personal income tax by a full percentage point could generate an eye-popping $4 billion.

Wolf is also seeking to extend the sales tax to professional services, including those provided by lawyers and accountants.

Wolf wants to use a large portion of the new revenue to lower property tax bills across the state - although in Philadelphia, the money would be used for wage-tax relief, the sources said.

Public schools, which fared badly in Corbett's first budget, would also be beneficiaries of the new tax revenue.

The governor is also looking to raise taxes on cigarettes by roughly $1 per pack, although Philadelphia, with its recently approved $2-per-pack hike, will likely be exempt, according to sources.

Sen. Anthony Williams (D., Philadelphia) called some of Wolf's proposals "a grand slam."

"We will be the envy of the nation if we can do this," he said.

Still, Wolf's budget prospects in the legislature appear bleak.

Senate Majority Leader Jake Corman (R., Centre) said he keeps hearing about new taxes but nothing about one of the state's most pressing problems: the skyrocketing cost of public employee pensions.

Until his caucus sees movement on that front, Corman said, Senate Republicans are not open to discussing new revenue.

"It's hard to tell the public you have to pay more when we aren't doing anything to deal with our pension problem," Corman said Friday.

He added of Wolf: "Tuesday is his day to lay out his vision, and we respect that . . . but so far we haven't seen any signs that this process is going to be smooth sailing."

Hughes disagrees. He said he believed that in the last four years under Corbett, "there was a minimalist viewpoint of the world: a little here, a little there. There were very few new and exciting initiatives."

"When you set a high aim to try and do big things, you can accomplish big things," Hughes said. "I think Harrisburg has the capacity to make big decisions."

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