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State Budget in Home Stretch...Again

12/18/2015

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After nearly six months of delays, angry rhetoric, hurt feelings and premature promises, the Pennsylvania state budget is in the home stretch. Actually, it feels like it is in its fourth home stretch.

As the Spectrum went to press, the Senate of Pennsylvania and the House of Representatives have passed their version of the State Budget. The Senate’s $30.8 billion version is closer to what the Governor would like to see, with historical increases in basic education. The House plan is much more conservative, as many rank-and-file House members balked at the spending included in the Senate version, leaving leaders without the votes to pass it. 
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The aforementioned spending increases combined with current year budgetary shortfalls leave the state with approximately $600 million to raise in what remains of the 2015/16 fiscal year, and nearly $1 billion going forward. Where that money comes from is under negotiation, and much of what is being considered has the potential to harm PFMA member businesses:

• An expansion of the sales tax base. Much of what is being discussed for expansion do not directly affect food retailers, but other services, such as dry cleaning and amusement parks that were previously exempted are now on the block.

• The elimination of the vendor sales tax allowance. One percent of all sales tax is remitted back to the vendor to facilitate collection. Several proposals have proposed lowering that percentage, capping total remittance or eliminating it altogether.

• Personal income tax. The Governor’s original proposal suggested raising the personal income tax from its current rate of 3.07 percent. That and other broad-based tax proposals were discounted by a cautious legislature, but may resurface.

• Sales tax. Much due to PFMA member letters and calls, a proposal to eliminate or reduce property tax by raising the six percent sales tax to 7.25 percent was defeated. But it was also in the Governor’s original proposal, and is a lucrative way of filling the budgetary shortfall, and therefore can resurface at any time.

• Cigarette and other tobacco taxes. PFMA and its allies were successful in reducing the proposed one-dollar-per-pack tax to 75 cents, but it is the association’s position that 75 cents is still way too high for what is an already overtaxed product and cannot provide predictable recurring revenues.

• A business filing fee. Another concerning policy option for potential revenues is a fee for businesses to be submitted when filing their taxes. The fee would vary depending on the corporate structure of the filing company. The plan is possible due to the high amounts of revenues that could be generated, but not being strongly considered due to its punitive nature for all Pennsylvania businesses.

PFMA members are encouraged to contact their legislators and ask them to consider other revenue sources rather than those that place the burden on an already fragile business community. PFMA and its allies will continue to advocate for the same on behalf of its members.

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