Potential Budget Agreement Looks Like a Shell Game and Tax Hike - Citizens Alliance of Pennsylvania

Potential Budget Agreement Looks Like a Shell Game and Tax Hike

According to media accounts, there is some movement on the state budget, and it sounds like a bad deal for taxpayers:

“Under the preliminary deal, state spending would rise to $30.7 billion, up about 6 percent from last year’s approved budget. It would be boosted by about $500 million in slot-machine gambling revenue that is currently passed along to homeowners as school property tax cuts. That money would be diverted into a restricted account to pay for public school employee pension obligations.

The loss of that money for school property tax cuts would be replaced by about $2 billion expected from a state sales tax increase to 7.25 percent, up from the current 6 percent. The rate would rise to 8.25 percent in Allegheny County, where it is currently 7 percent, and to 9.25 percent in Philadelphia, where it is currently 8 percent.” (Emphasis added)

Here is the shell game; right now $500 million from slots is being used for property tax “relief”. The higher sales tax rate will add $2 billion to that pot. If this were dollar-for-dollar tax relief, $2.5 billion would be paid out to taxpayers, but that is not what happens. Instead, the original $500 million from slots will be spent on pensions leaving only $2 billion for property tax relief. Therefore, this plan is a $500 million tax increase.

Making matters worse, the agreement does not eliminate the pension system for new state employees. Rather, it puts a “cap” (at this point undefined) on pension benefits and adds a 401-k style plan for anything above that cap. We talked about a similar proposal here. The Republicans also have not secured a commitment from the Governor for liquor store privatization.

To sum up: the new budget proposal increases taxes, has weak pension reform, and may not privatize the liquor stores. In short, it is a terrible plan. If this budget plan or something similar becomes law, House and Senate Republican leaders will have abandoned fiscal sanity and should be held accountable.

Click here to contact the legislature and let them know you can’t afford higher taxes.