- Associated Press - Saturday, June 6, 2015

HARRISBURG, Pa. (AP) - Pennsylvania state representatives found a tax issue they could agree on last week, voting unanimously against a Republican amendment that had bundled together all of Democratic Gov. Tom Wolf’s revenue proposals.

The point of that exercise was to demonstrate that the freshman governor’s tax package lacked support in the GOP-controlled chamber, although the “no” votes from Democrats were largely about a feeling the measure was more designed to embarrass Wolf than a serious step toward passing a state budget by the June 30 deadline.

That hardly ended debate over taxes in Harrisburg, not with a large structural deficit, considerable public support for more school funding and the governor’s determination to balance the books without using the sorts of stopgap measures that have contributed to a series of credit downgrades for the state.

“We are open to good ideas about recurring revenue, but you don’t fix the budget with one-time gimmicks, one-time asset sales,” said John Hanger, Wolf’s policy secretary. “That doesn’t fix the structural deficit.”

Wolf wants an extraction tax on natural gas drilling to send more money to public schools, a proposal that was a major element of his successful campaign last year. He wants to use a mixture of higher state income taxes and higher sales taxes, applied to more items, to balance the budget and cut property taxes. Wolf also wants to increase banking and cigarette taxes, while eliminating the capital stock and franchise tax and cutting by half the corporate net income tax rate.

The Senate’s top Republican, President Pro Tempore Joe Scarnati of Jefferson County, argues the state should cut public pension benefits and privatize the state liquor stores, which he believes will generate funds that can be used to cut into a budget deficit he puts at $1.2 billion to $1.4 billion (Wolf said recently the sides disagree on the deficit’s size).

There’s also movement in the Senate toward allowing Internet gambling, which also would bring in new money.

“It’s troubling to me to read where the administration says, ‘You folks in the Legislature can embark upon looking for revenues from gaming. I still want my tax increases.’ What the governor is essentially saying (is), ‘I don’t care what you do, even if you erase the structural deficit, I want a tax increase.’ That’s bad economics,” Scarnati said.

Wolf spokesman Jeff Sheridan said Scarnati helped create the structural deficit and “can’t just wish it away.”

The governor is open to talking about Internet gambling, Sheridan said, but it’s unclear how much money it might generate.

“There is no revenue estimate that we have seen that would cause us to replace anything in the governor’s budget with it,” Sheridan said.

If lawmakers can’t get a global deal with Wolf, Scarnati said, they will send him a budget balanced with the help of money from liquor store licenses and pension savings.

“We have two paths we can go down,” Scarnati said. “Clearly we want to have an agreement. We want this to work out.”

Democrats who generally oppose cutting state workers’ and teachers’ pensions or privatizing liquor stores say they doubt those changes can provide significant revenues for the coming year to close the budget gap.

“We’re going to have to raise some new revenues, and I think any denial of that is not being honest to the people of Pennsylvania,” said Rep. Joe Markosek, the ranking Democrat on the Appropriations Committee. “We kicked the can down the road the last four years, and now we’re stuck with this immense problem.”

Even cutting school property taxes, a topic that’s arisen regularly in the General Assembly, may not make it through the state’s divided government this year.

Scarnati said people who pay those school property taxes have been disappointed that casino gambling has not gone farther to cut their bills and will not accept a plan that reduces - but does not fully eliminate - the much-maligned levies.

Wolf said in a Facebook town hall several days ago that, as a matter of policy, he thinks there should be a local contribution to schools, so he wants the state share to be 50 percent, not 100 percent.

The House passed a bill last month that would severely cut property taxes with higher sales and income taxes, giving new momentum to a subject of perennial interest in the Legislature. It differs in several ways from Wolf’s own plan, but he said it was an encouraging development.

Kevin Harley, a top adviser to Wolf’s predecessor, Republican Gov. Tom Corbett, said income or sales tax increases don’t seem likely at this point, but a lot can change in Harrisburg in the weeks before a budget deal is struck.

“The world looks a lot different at the end of June than it does at the beginning of June,” he said. “That 30 days can seem like three months.”

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Mark Scolforo covers state government for The Associated Press in Harrisburg. Contact him at [email protected], or follow on Twitter: @houseofbuddy.

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