Let’s make a deal
Eventually, Gov. Ed Rendell and Republican lawmakers must reach an agreement on a budget for the 2009-10 fiscal year.And just as eventually, that’s going to include coming up with around $1 billion in revenue from several sources.Call it, as The Philadelphia Inquirer did, the $1 billion question. Here are some ideas the paper reported are being kicked around in Harrisburg to reach that magical $1 billion mark: – Tobacco taxes. Adding 10 cents to the tax on a pack of cigarettes and imposing a tax on cigars and smokeless tobacco would generate about $99 million in annual revenue. (Pennsylvania is one of the few states that does not tax cigars and smokeless tobacco.)
– Rainy Day Fund. Using the $750 million in this reserve would take a big bite out of the $1 billion hole in the budget.
– Tax natural gas extraction. Doing this would raise $107 million in the first year and $632 million by 2013.
– Business tax changes. Closing the so-called “Delaware Gap,” which allows corporations to move income out of Pennsylvania and avoid taxes here, and suspending the planned phase out of the Capital Stock and Franchise Tax could net the commonwealth about $800 million.
Of course, each tax has a downside.
In addition to going to the well once too often and hitting smokers, the amount of revenue that would be generated wouldn’t amount to one-tenth of what is needed.
However, taxing smokeless tobacco and cigars is still a good idea and should be done.
Meanwhile, using the entire Rainy Day Fund would leave the state with no reserves for next year, taxing natural gas extraction could harm an industry in its infancy, and messing with the business taxes would hurt employers and employees – and reinforce the state’s image for being anti-business.But because increasing broad-based sources of revenue like the sales tax or income tax is off limits, the two sides don’t have many options.
Eventually, they must overcome this political divide and accept things they don’t like. Why not put an end to this budget debacle, and make those concessions sooner rather than later?