With all of the chaos of the Iowa Caucuses, the Senate wrapping up its impeachment proceedings, and the State of the Union address, you might have missed Governor Wolf’s budget address last week. The budget address is similar to the State of the Union; it is mostly a piece of political theater.
In the speech, the Governor lays out the administration’s policy vision for the next year. Governor Wolf’s budget addresses have primarily contained the same bad ideas and half-truths every year. This year was no exception. The Governor is still insisting that the natural gas industry isn’t paying their “fair share.” It’s worth noting that the impact fee paid by the natural gas industry will likely generate close to $200 million in 2020, a decrease from 2019’s record-breaking numbers (due to lower natural gas prices). Governor Wolf also wants to reduce school choice options, increase the minimum wage, and increase public assistance in covering the cost of childcare. Ironically, raising minimum wage costs will have a ripple effect and make childcare even more expensive, and that would probably require even higher levels of public assistance.
In the midst of all of the terrible ideas, Governor Wolf did touch on two policy requests that he got at least half-right. First, Wolf suggested that Pennsylvania lower its corporate net income (CNI) tax rate. The Commonwealth has the second-highest CNI in the country, and it is often cited as a reason why businesses don’t locate or expand in Pennsylvania. He paired the tax rate reduction with some complicated changes to the tax code, called combined reporting that will make it more burdensome for businesses to file their taxes and end up increasing their tax bills in the state.
He requested the combined reporting change to make up for “lost revenue” from the lower tax rate. A better way to pay for the reduction in the tax rate is to eliminate the corporate welfare and targeted tax breaks offered by the Commonwealth to politically connected firms. This would create a level playing field and improve the overall business environment. Over time, a better climate would encourage new businesses and business expansion, and that would generate even more revenue for the treasury.
The Governor’s other good idea was tapping into the $250 million Race Horse Development Fund. The fund, replenished annually, is derived from Pennsylvania’s casinos and subsidizes the horse racing industry. One notable beneficiary was the multi-billionaire, Vice-President of the United Arab Emirates. There are quite a few other items that should have priority over subsidizing the sport of kings.
Governor Wolf is proposing to use the funds from the Race Horse Development Fund to create grants for students attending Pennsylvania’s state universities. Decreasing the cost of education is laudable, but a complete overhaul of the state’s universities would accomplish the same goal. And, while we’re at it, the universities should probably look at what percentage of the students’ tuition is going to education versus what is spent on administration and empire-building through the construction of new buildings, etc.
The House and Senate will be conducting budget hearings for the next couple of months. We will be sure to keep our readers informed of any notable developments.