During a six hour session in which a litany of legislators debated the impacts that Wolf’s new tax plan would have on the Commonwealth’s citizens and businesses, it was clear that most weren’t swayed from the original vote they cast almost 100 days ago.
Two weeks ago, Republicans challenged the Governor and Democratic legislative leaders to put up the votes, on the revenue package that’s been front and center in budget discussions since March. After two weeks of private meetings and public chastisements, the House this week prepared for a vote on what had become a very modified version of the Governor’s initial tax plan. A copy of that proposal as of October 6 is available on ERG Partners’ website here.
The proposal included a 16% increase in state income tax levels, from 3.07 to 3.57 percent, and a 3.5% severance tax on Marcellus shale gas with a 4.7 cents per thousand cubic feet ($0.047 per Mcf) charge. As sweeteners for the difficult tax votes, the proposal expanded forgiveness from the personal income tax to 150% of poverty, and a transfer of almost $500 million in property tax relief. The net increase in revenues projected by the proposal would be $2.373 billion in FY 2016-2017. Off the table were the 10% proposed expansion of the state sales and use taxes, and 5% severance tax rates, which had been part of the Governor’s tax proposal since March.
Democrats hoped to get traction and support from southeastern Pennsylvania Republicans while holding their 84 caucus votes, but as the vote approached, it appeared possible that not even all Democratic members would vote for the increases. Southwestern PA Democrats in particular were vocal about the potential of the vote to cost them re-election and several were clear that they did not want to support either broad based taxes or a severance tax. Some even suggested they might vote with the GOP for a stopgap budget or hold the line entirely on tax hikes.
Republican leaders promised not to lobby their members and to allow the Governor the opportunity to meet with all Republicans. The Governor took to the news media and called the proposal simply a recognition of budget realities, and necessary to deal with structural budget deficits. Without revenue increases, he said, the state would be $2 billion short in the next fiscal year.
House Majority Leader Dave Reed said that passage of the amendment would result in a final vote and renewed consideration of a budget plan to spend the revenues, but that if the vote failed, he thought the Governor should give up on broad based taxes. He said that he expected a quick dialogue with the other three caucuses in that event, to see what the Legislature could agree to, and noted he’d consider “outside the box” type proposals to get a budget done. “We’re not going to continue to live in this purgatory for months. We’ve already lived here for four or five months now,” he said.
After the amendment was defeated by a vote of 127-73, Reed said, “Now we’ve chosen a path. We’ve recognized that broad-based tax increases, for the budget, just do not have the votes necessary in the House for passage.”
Wolf, however, views the vote differently. “We put together a real big group of votes to do something really tough,” he said. “The fact that 73 were willing to do that… I think sends a strong signal of support for addressing the real problems that Pennsylvania faces.”
It remains to be seen what will happen next, though both sides agree, it is back to the negotiating table and the sooner, the better.