PA budget still needs addressed

Pennsylvania Republican legislative leaders and state Budget Secretary Randy Albright said in December that the commonwealth’s deficit problems were resolved with the passage in October of the Fiscal Year 2017-18 revenue package.

They said that long-drawn-out preparation exercise, completed nearly four months after the state budget completion deadline, will avoid the need for any broad-based state tax increases for FY 2018-19.

While that was a welcome opinion, it can be construed as having been contradicted by observations from three economists during a Jan. 18 hearing of a House Appropriations subcommittee on fiscal policy.

At the hearing, during what the online news and information service Capitolwire described as a philosophical and analytical discussion of budgetary pressures facing this state, one of the economists said, “I think you guys (lawmakers) are in a pickle,” referring to what he described as an inadequate state tax base to support increasing state government spending.

One of the other economists said, “a combination of spending cuts, tax rate cuts and tax base broadening could make Pennsylvania’s economy grow faster without jeopardizing the state’s ability to provide valuable services.”

The other economist suggested broadening the base of the 6 percent sales tax to include more services — action that he predicted could help generate the revenue to enable cutting state taxes.

During the hearing, the state’s 3.07 percent personal income tax rate was characterized as one of the bright spots in the state’s tax structure, but the commonwealth’s 9.99 percent state corporate income tax rate was described as sticking out like a sore thumb compared to other states’.

The economists advocated cutting the corporate rate.

But while that suggestion might not spawn controversy, that wouldn’t be the fate of another of the economists’ recommendations — that retirement income such as Social Security payments no longer be exempted from the personal income tax.

This state’s government hasn’t been willing to impose a severance tax on the Marcellus Shale gas-drilling industry like other Marcellus states have implemented. Likewise, Pennsylvania lawmakers haven’t been willing to increase the personal income tax for working individuals, no matter what dire straits the state’s budget has been in — even a temporary increase of a couple of years.

Thus, expect a groundswell of opposition from retirees and near-retirees — and political careers being jeopardized — if a serious proposal ever were put forth to apply the income tax to retirees on fixed incomes.

Subjecting Social Security recipients’ benefits to the income tax would badly burden many of the recipients, many of whom already are forced to make difficult decisions regarding their health and living conditions.

While what the economists told the House panel might make sense in some respects, some of those opinions don’t reflect the realities under which people are living.

Meanwhile, state government continues to make spending and budgeting decisions not always in the state’s — or its taxpayers’ — best interests. Gov. Tom Wolf will be unveiling his 2018-19 budget proposal today. State residents should pay close attention to what he says and how the Legislature reacts.

Pennsylvania might no longer be experiencing a deficit crisis, but it’s safe to say that the Keystone State isn’t out of the proverbial woods.