LANCASTER, Pa. (AP) - Pennsylvanians will like the results of the deal under negotiation to end a state government budget stalemate now in its fifth month, Gov. Tom Wolf said Thursday.
Wolf, a first-term Democrat, has said little about elements of the sprawling deal since they were announced Monday by top Republican lawmakers. Under the proposed deal, Pennsylvania’s sales tax would increase to become the second highest in the nation, while the state’s Marcellus Shale natural gas industry scored a legislative victory, beating back Wolf’s efforts to increase taxes on it.
Wolf acknowledged that the deal secures about half the amount of school property tax reductions that he had originally sought in his March budget plan. Meanwhile, the proposed property tax reduction of about 15 percent would be financed by a 21 percent increase in the sales tax, which Democrats complain is the tax that hits the poor the hardest.
However, Wolf is billing the deal as delivering a record increase in aid to public schools, his biggest priority, and the first substantial school property tax reductions as part of his broader goal to narrow huge funding disparities between Pennsylvania’s wealthier and poorer school districts.
“I’m not getting everything I wanted, obviously, but there’s some amazing, big things that are changing as a result of this framework if we can bring it across the finish line that I think all Pennsylvanians on the whole should like,” Wolf told reporters after a public appearance in Lancaster. “Did we get everything? No. But this moves Pennsylvania forward.”
Wolf did not get the tax increase he wanted to eliminate a long-term budget deficit, but he said the deal will put state government on the path of balancing its budget without the use of one-time stopgaps that he called “smoke and mirrors.”
Initially, Wolf had sought an estimated net tax increase of $4.6 billion in the 2018-19 fiscal year, the deal’s first full fiscal year in effect, after counting $4.6 billion in tax cuts or other reductions. His plan had relied on higher taxes on income, sales, tobacco, banks and natural gas production to wipe out a long-term budget deficit, boost public school aid and cut property and corporate taxes.
Under the deal still being negotiated, the sales tax would rise by about $2 billion a year, with support from Republican lawmakers who successfully resisted Wolf’s efforts to also raise taxes on personal income and Marcellus Shale production.
Wolf said Thursday that he will continue to pursue a tax on Marcellus Shale production in the future. He also said the sales tax, because of exemptions for food and clothing, is not as regressive as some other sales taxes.
Winning approval from Republicans on a progressive formula to distribute the resulting property tax reductions “will offset the regressive nature of a sales tax,” Wolf said.
That formula is still under negotiation, he said.
Under the agreement, the state sales tax would increase to 7.25 percent, up from the current 6 percent. The rate would become 8.25 percent in Allegheny County, where it is currently 7 percent, and 9.25 percent in Philadelphia, where it is currently 8 percent.
Tax increases on cigarettes and banks were still under discussion, as is the elimination of a long-standing payment to retailers called the “vendor discount” in exchange for them collecting sales taxes.
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