State Budget


2015-2016 Pennsylvania State Budget

Crafting a fiscally responsible budget that keeps spending levels low and promotes the creation of new jobs in Pennsylvania.

Budget Hearings

Senate Appropriations Committee Chair Pat Browne breaks down the Governor’s budget proposal.

Budget Reactions


Senate Republicans Oppose Wolf’s Harsh Tax Increases That Hurt Families and Employers

Senate Republicans criticized the significant burdens associated with the Wolf budget plan, saying what Pennsylvania needs is relief. Republicans, who hold a 30-19 majority in the Senate, have made it clear that they will not support Tom Wolf’s enormous tax increases on Pennsylvania families and employers.

“While we certainly respect that the Governor has a concept for the 2015-16 state budget, the Senate Republican Caucus does not believe that massive tax increases will help make Pennsylvania a stronger state,” said Senate President Pro Tempore Joe Scarnati (R-25). “Today’s budget certainly clarifies that Governor Wolf is fixated on taxing and spending his way out of the state’s problems. As budget discussions progress, Senate Republicans will be a voice for reason and helping to provide relief from the disastrous effects Tom Wolf’s budget would have on hardworking residents across our Commonwealth.”

The Governor is proposing devastating tax increases totaling $4.7 billion for the upcoming fiscal year – the largest in state history. His proposal would raise taxes by $12 billion over the next two fiscal years – about $1,000 for every man, woman and child in Pennsylvania. Families will pay more in personal income taxes and sales and use taxes, which, under the Wolf plan, increases and makes additional items taxable. It is immensely concerning that in his proposal, there is nothing that will keep property taxes from going back up.

“The proposed Wolf increase to the personal income tax will cost families of four earning about $52,000 a year approximately $331 a year, which is more than one week’s worth of groceries,” said Senate Majority Leader Jake Corman (R-34). “Combine that increase with changes to the sales tax, and families will feel the one-two punch of this budget directly in their pocketbooks to cover the excesses of government spending. Pennsylvania families cannot simply raise their revenues to fund the Governor’s desire to spend on unproven programs. Relief for Pennsylvania comes in the form of changing the system – addressing the structural deficit problems such as pensions – before considering new revenue sources.”

While Gov. Wolf is engrossed in borrowing over $6 billion against the state, and spending billions and billions of dollars, the Senate Republican Caucus remains focused on tangible initiatives to help Pennsylvanians, such as passing pension reform and improving the state’s business environment.

“We need to address current funding shortfalls and structural deficits facing the Commonwealth, including an unsustainable pension obligation, before we look at increasing spending and instead of raising taxes on our hardworking families and employers,” said Senate Appropriations Chairman Pat Browne (R-16). “Higher income and sales taxes, a massive energy tax and a $4.7 billion increase in spending is not going to help grow our economy — it will only grow our government. Our citizens and Pennsylvania employers need real reforms and relief, not increased burdens.”

“It is clear the number one budget issue for the state and school districts is the increasing pension commitment, which cannot be avoided,” said Senate Majority Whip John Gordner (R-27). “Rather than focus on tax increases, we should look at pension reform as the first step in responsible budgeting.”

Senate Republicans stressed that in these challenging economic times, the Commonwealth must chart a clear and predictable course that focuses on fiscal restraint and core priorities.

“Over the past four years Pennsylvania’s economy has been on the right track, as Pennsylvania’s unemployment rate is at the lowest rate in more than six years and with the right fiscal policies, it can go lower,” said Scarnati. “We will not allow the irresponsible budget proposed by Tom Wolf to destroy the hard work we have done over the past several years to develop a strong business climate and increase access to good family sustaining jobs across Pennsylvania.”

Budget snapshot

  • The Governor’s proposed $31.6 billion budget for Fiscal Year 2015-16 represents an increase of $4.7 billion (16.1 percent) increase from Fiscal Year 2014-15.
  • The Governor’s proposed 2015-16 budget signifies a return to the free-spending ways that were a hallmark of Ed Rendell’s budgets during his tenure as Governor. This budget, which proposes huge tax increases and liberal spending, really shouldn’t come as a major surprise since Governor Wolf and many of his top aides served in the Rendell Administration and seemingly learned those lessons at the foot of their master.
  • The Governor is proposing tax increases totaling $4.7 billion for the upcoming fiscal year.
  • His proposal would raise taxes by $12 billion over the next two fiscal years – about $1,000 for EVERY man, woman and child in Pennsylvania.
  • The massive tax increases proposed by the Governor go way beyond being simply a war on working Pennsylvanians. It is an economic scorched earth policy that would devastate family budgets, throttle small businesses, eliminate jobs now and place a damper on the prospects for the creation of new ones in the future – all in the name of unrestrained government spending.
  • The budget includes massive increases in Personal Income Taxes, Sales and Use Taxes and the state Cigarette Tax. It would also create a new Severance Tax and impose new taxes on cigars and other tobacco products.
  • The hefty burden of the Governor’s tax increases would be felt by all Pennsylvanians. The proposed personal income tax (PIT) increase would slash the take home pay of the average Pennsylvania family by more than $300.
  • The Governor’s proposal ignores the escalating costs of Pennsylvania’s public pension programs in favor of incurring $3 billion in new debt for PSERS. Instead of working to enact meaningful reform, the Governor proposes to pass additional costs on to future generations,
  • Funding increases are proposed for basic education funding ($400 million); special education ($100 million); Pre-K Counts ($100 million); higher education ($160 million); Human Service programs ($700 million); and Corrections ($150 million).

Personal Income Tax increase

  • Governor Wolf’s proposed 20.5 percent increase (from 3.07 percent to 3.7 percent) would take an additional $2.4 billion from individuals, families and nearly 1 million small businesses across the Commonwealth.
  • Based on the US Census, the average family income is Pennsylvania is $52,548, meaning those families pay $1,613 in PIT based on the 3.07% rate. Increasing the rate to 3.7 % would result in a PIT bill of $1,944, a $331 cut in take home pay for that family.
  • The cost for Pennsylvania’s small businesses, many of whom pay Pennsylvania’s PIT, would see the Wolf tax hike take a substantial — if not fatal — bite out of their bottom line. It would drive up costs for consumers and surely put jobs at risk.

Sales and Use Tax increase

  • In fact, small businesses — which form the backbone of Pennsylvania’s economy and employ thousands of its citizens — would be hit hard on many fronts by the tax increases in Governor Wolf’s budget proposal. For some, especially those in our border counties where the proposed 10 percent hike in sales taxes would hit hardest, may find the excessive cost of doing business in Pennsylvania to be too high to keep their doors open.
  • Currently only 12 states have sales tax rates above 6 percent: California (7.5 percent); Indiana, Mississippi, New Jersey, Rhode Island and Tennessee (7 percent); Minnesota (6.875 percent); Arkansas (6.5 percent); Connecticut (6.35 percent); Illinois and Massachusetts (6.25 percent); and Kansas (6.15 percent). http://www.salestaxinstitute.com/resources/rates
  • If the sales tax increase is approved, Pennsylvania would have the dubious distinction of having the seventh highest rate in the nation.
  • Pennsylvania already has one of the highest sales tax rates among the New England/Atlantic region states. An additional increase will make Pennsylvania less attractive for commerce. State residents could look at neighboring states for savings when making major purchases.
  • Raising the sales and use tax rate could have a devastating effect on businesses in Pennsylvania’s border counties as consumers look to neighboring states for purchases, as Delaware has no sales tax. New York State has a 4 percent rate. Ohio has a 5.75 percent rate and both Maryland and West Virginia have 6 percent sales tax rates.
  • Pittsburgh would be looking at a sales tax rate of 7.6 percent and Philadelphia would rise to 8 percent, which could further hinder the already distressed economies of two of Pennsylvania’s major metropolitan areas.

Regressive taxes hurt low-income families

  • The sales tax increase would be particularly devastating to low-income families. According to the left-leaning Institute for Taxation and Economic Policy (ITEP), sales taxes already take a 5.8 percent bite out of the total income of Pennsylvania’s lowest income families. Increasing the sales tax rate would mean those people would see their spending power decrease even further.
  • According to estimates produced by ITEP based on Consumer Expenditure Survey data, low-income families typically spend three-quarters of their income on things subject to the sales tax, middle-income families spend about half of their income on items subject to sales tax, and the most affluent families spend only about a sixth of their income on sales-taxable items.
  • Statistically, cigarette tax increases have a more significant impact among low-income people. Therefore, that segment of Pennsylvania’s population would be most dramatically impacted by the Governor’s proposed $1 per-pack increase (to $2.60 per-pack) of this regressive tax.

Taxing Natural Gas Jobs

  • The natural gas industry has created 245,000 direct and indirect jobs in the state since 2007, according to Pennsylvania Department of Labor and Industry estimates. These jobs have provided a tremendous economic boost to communities across western and northern Pennsylvania.
  • Act 13 of 2012 imposed an unconventional gas well fee which has provided more than $630 million to local and county governments to compensate for impacts of the industry, in addition to more than $2 billion companies have paid in state taxes.
  • The Governor’s proposed Marcellus Shale Extraction Tax of 5 percent of the value of gas at the wellhead and 4.7¢ per each 1,000 cubic feet of volume severed represents about a 7.5 percent tax rate – one of the highest in the nation. Only Texas has a 7.5 percent extraction tax, but that state doesn’t impose a corporate tax.
  • The Governor’s proposed extraction tax proposal comes at a time when many companies are scaling back their operations and laying off workers because of low gas and oil prices.
  • This tax not only imperils thousands of jobs in the industry, but could negatively impact plans by Shell to build a cracker plant in western Pennsylvania that would directly create hundreds of jobs and thousands more through spin-off businesses.

Conclusion

  • In these difficult economic times, the Commonwealth should chart a clear and predictable course that focuses on fiscal restraint, core priorities, targeted tax policy that does stimulate the economy, and the sustainability of those financial and budgetary decisions in the future.
  • The Taxpayer Protection Act bill and constitutional amendment, introduced by Senators Mike Folmer and Camera Bartolotta, would limit state spending to the average inflation rate plus the average percentage change in state population over the three preceding years.
  • While the legislation sets clear limits on spending, it also provides some exceptions for certain extraordinary circumstances. We recognize that not even the best financial planners can predict the future with certainty. We need to be firm in our resolve to limit spending; but at the same time, we must be pragmatic and provide a safety net that would allow some flexibility during times of emergencies.
  • In addition to the spending limits in the Taxpayer Protection Act, the proposal also sets realistic restrictions on the use of any unanticipated revenues received by the Commonwealth.