Expect Legislature to Deflate Governor’s Tax and Spend Budget

On February 3, Governor Wolf unveiled a proposed $40.2 billion General Fund Budget for Fiscal Year 2021-22, which includes a $3.1 billion spending increase, a Personal Income Tax (PIT) rate hike from 3.07 percent to 4.49 percent, and a recurring call for a Marcellus Shale extraction tax. As the clock ticks down to the end of the current fiscal year on June 30, it is unlikely that these tax increases will be approved through the General Assembly. Essentially what was put out in February was simply an opening bid in what will certainly be a lengthy negotiation process that hopefully will be completed by the end of the state’s current fiscal year on June 30.

As Pennsylvania is struggling to recover from the pandemic, this is an inopportune time to call for a 46.3 percent increase in the state’s PIT rate. As Chairman of the Senate Finance Committee, which oversees state tax policies, I believe the proposal to cut taxes for some, while substantially increasing them for others, is a thinly-veiled attempt to impose a graduated income tax in Pennsylvania. The proposal would not just set a dangerous precedent — it runs counter to our laws and our state Constitution.

Pennsylvania’s one million small businesses would be devastated by the rate increase since they pay business taxes at the PIT rate. Many are already barely surviving the dual threat of the pandemic and the closure orders. They simply cannot be subjected to an additional tax burden. In the end, I anticipate that most of my colleagues will join with me to ensure that the tax increase proposals are not part of the final budget package.

This article was published in the Venango Chamber’s June 2021 VenangoWorks! Newsletter.