Republicans and Democrats show differences of opinion on tax policy

Republicans and Democrats show differences of opinion on tax policy

Author: Jason Gottesman/Tuesday, June 20, 2017/Categories: News and Views

As revenue generation has been a key component to ongoing budget talks, tax policy in some manner has been part of the discussion; and, with the legislative calendar turning ever closer to June 30, Democratic and Republican lawmakers have been showing their differences of opinion in terms of how taxes should play in terms of the overall revenue picture for the Commonwealth.


Take legislative action on Tuesday, for instance.


In the Senate Finance Committee, legislation was approved to establish a tax credit for equipment purchased by data centers and their tenants. Additionally, legislation was introduced by Sen. Randy Vulakovich (R-Allegheny) to create a sales tax “holiday” for the purchase of emergency equipment like fire extinguishers and generators.


Meanwhile, in his proposed budget, Gov. Tom Wolf has gone the other way on what he labeled “tax loopholes.”


As part of balancing his spending plan, the governor proposed obtaining nearly $500 million in revenue by eliminating “special interest tax loopholes” in terms of commercial storage, customized software and services, prepared foods sold by airlines, and aircraft maintenance and repair.


Meanwhile, legislative Democrats are still discussing the possibility of using broad-based taxes to balance the budget despite that funding source being taken off the table by Gov. Tom Wolf as early as February and it has never been a favored revenue source of Republican leadership.


However, two top Democrats this week discussed how they feel the use of broad-based tax increases could help the Commonwealth finally get out of the structural deficit issue lagging behind each state budget for the last several fiscal years.


“Basically, it’s an acknowledgement that you can’t cut your way out of this budget," House Democratic Caucus Chairman Dan Frankel (D-Allegheny) said Monday of a proposal to borrow against Tobacco Settlement Fund dollars being floated by Republicans.


"It’s an acknowledgement that you need at least $2 billion; so, why don’t you do it the right way, the way every other governor did it until Tom Corbett—Republicans and Democrats—you’ve got to look at raising revenues through some kind of broad-based source.”


Senate Minority Leader Jay Costa (D-Allegheny) said, while not likely in the coming fiscal year, broad-based tax increases are the most efficient way for the government to balance its books.


“There’s some who believe that though folks have said they won’t be doing any broad-based taxes at this point in time, maybe folks will come to realize there is no other revenue options to look at that, that maybe we will go back and do a broad-based tax increase and I hope that conversation does occur because we do need to fix our fiscal situation,” he said.


“We don’t need to be heading into 17-18 and 18-19 with shortfalls, with cuts to programs that impact people’s lives.”


Some conservative rank-and-file Republicans, however, are looking more into tax and spending cuts rather than closing tax loopholes and raising broad-based tax increases.


“Once you start chasing revenues in state government you will always chase revenues; there will never be enough,” Rep. Seth Grove (R-York) said at a press conference on lowering Pennsylvania’s business taxes Tuesday morning.


“Holding down spending and doing proactive tax policy changes like other states are doing—and we are falling behind those states to compete for businesses and jobs—we will start closing those deficits and increasing our economy.”


Additionally, while not gaining traction in many Republican circles, Democrats are still banging the drum on the need for a severance tax on natural gas extracts.


As recently as a Monday House Democratic Policy Committee hearing, some members were discussing the need for such a tax to help offset rising education costs.


“One of the ways we can begin to recommit ourselves to adequately supporting the system is a shale tax,” said Rep. Madeleine Dean (D-Montgomery). “It is a wise policy choice when we are taking resources out of the ground; we ought to do the best to give it to our resources here.”


While not specifying where the money should go, support for a shale tax was echoed by Sen. Costa recently and legislators associated with the CLEAR coalition have called for the tax to be part of the budget.


In his proposed budget, Gov. Wolf has counted on nearly $300 million from a 6.5 percent shale tax.


Currently, many discussions about tax policy changes remain on the back burner as forefront discussions surround gaming expansion and the leveraging of state assets as the means to bridge the budget divide for the current and coming fiscal years.