Republicans in the Legislature say Pennsylvania can’t afford Gov. Ed Rendell’s income tax increase. The way the economy is going, the state might not be able to live without it.
After a spring in which state Cabinet secretaries were on a mission to prep the press and the public for the horribles that would unfold if the Senate budget plan were adopted, Mr. Rendell dropped the other shoe Tuesday by calling for a 0.5 percentage point boost in the 3.07 percent income tax.
The 16 percent jump in the tax rate would expire after three years, the governor said, and be accompanied by a temporary suspension in the phaseout of the Capital Stock and Franchise Tax on business assets. The business tax is 1.89 mills today, but would become 2.89 mills for the next three years.
Facing a mounting deficit now projected at $3.2 billion, the administration previously announced spending cuts of $1 billion and plans to raise revenue from various sources. That still left the governor’s $28.5 billion budget way short, triggering his call for $1.8 billion a year from the higher income and capital stock taxes.
By contrast, the Republican-controlled Senate has offered a Draconian $27.3 billion budget that would unleash deep cuts on virtually every program and service: schools, hospitals, nursing homes, business aid, farms, prisons, state police — you name it. What’s more, even prior to the income tax proposal, Republicans were maligning the governor’s other sought-after revenue generators: $61 million from a higher cigarette tax, $38 million from a new tax on cigars and smokeless tobacco, $107 million from an extraction tax on the Marcellus shale gas deposits and $375 million from the Rainy Day Fund.
Earth to GOP ... this recession is rain, and it’s time to tap the fund.
Naturally, Pennsylvanians would prefer a lower income tax increase (if any at all), a one-year rather than three-year term for the higher rate and new savings from additional budget cuts (the governor ordered another $500 million in cuts yesterday). But difficult times require tough action.
The governor’s slashed budget and tax increases deal with the revenue shortfall by sufficiently spreading the pain so Pennsylvania can still move forward. The Senate Republicans’ approach of cuts-only will inflict untold harm when many Pennsylvanians, because of the national downturn, can least afford it.
We believe if given the hard choice, most Pennsylvanians would opt for the governor’s broad-based solution. But if neither Democrats nor Republicans want to be blamed for a disastrous outcome, it’s time to begin the long march toward compromise.