2009-10-22 / Local & State

State Budget Spends Too Much and Increases Taxes

Hess rejects measure

Citing too much spending, tax increases and the failure to prepare the commonwealth for future years, Rep. Dick Hess (RBedford/ Fulton/Huntingdon) recently voted against the 2009-10 state budget.

“I voted against this spending plan because it represents irresponsible fiscal management on behalf of the people of Pennsylvania,” Hess said. “We have a duty to ensure the commonwealth remains financially stable, and as soon as the governor signs this into law, we will be facing a deficit and massive tax increases next year.”

The budget would spend $27.8 billion, which is $1.1 billion less than what the governor demanded earlier this year. Although this is the first time since Gov. Ed Rendell took office that spending has declined, it does not take into account the serious impact the recession has inflicted on the commonwealth.

“Pennsylvania is still attempting to recover from the economic downturn,” Hess said. “Any unnecessary spending, which causes taxpayers to pay more, will further slow economic growth.”

Although this budget includes no broad-based tax increases, it does raid the $755 million in the Rainy Day Fund and the $708 million in the Health Care Provider Retention Account. In addition, $150 million of the Tobacco Endowment Account and $100 million of the Medical Care Availability and Reduction of Error (MCare) Fund will be used to balance the budget.

“I do not understand the reasoning behind completely draining Pennsylvania’s reserve accounts,” Hess said. “If the economy does not rebound, this could create a potential economic disaster for next year’s budget.”

The spending plan also relies on nearly $1.5 billion in new revenues, including a 53 percent increase in the capital stock and franchise tax (CSFT), which is paid by a business based on its value. This tax would revert from the current 1.89 mills to 2.89 mills. The CSFT was statutorily reduced to 1.89 mills on Jan. 1, and now state government wants business owners to retroactively pay the tax at the higher rate, resulting in a significant tax increase.

“Increasing taxes on Pennsylvania’s businesses hurts job creation and retention at a time when they are desperately needed,” Hess said. “When a business has to pay more in taxes, it has less money to hire people and expand operations.”

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