2010-06-03 / Local & State

Rendell Abandons State Sales-Tax Overhaul

By Peter Jackson ASSOCIATED PRESS WRITER

HARRISBURG, Pa. (AP) – Gov. Ed Rendell acknowledged Thursday that his plan to reduce Pennsylvania's sales tax and boost revenue by extending it to more goods and services is doomed – at least in this election year.

“It's just very complex and you'd be stepping on the toes of a lot of special interests. I don't think there's an appetite to do that this year,” the Democrat said at a Capitol news briefing.

In his February budget address, Rendell advocated cutting the tax rate from 6 percent to 4 percent and extending it to dozens of things that are now exempt, including many professional services, home electric bills, candy, firewood and personal hygiene products. Purchases of groceries, clothing and prescription drugs would remain exempt.

The sales-tax overhaul, expected to generate more than $850 million, had been the centerpiece of a larger package of tax changes.

Rendell originally proposed setting aside all of the revenue from those changes until July 2011 – six months into the term of his successor – to help blunt the expected loss of federal stimulus funds and a spike in public pension costs.

But lagging tax collections have left the state with a $1 billion-plus shortfall for the budget that runs through June 30, and he has said some of the proposed new tax revenue may be needed earlier to avert a deficit.

Serious discussions about how to deal with this year's shortfall and how to balance the budget for the new fiscal year have yet to begin.

Rendell has proposed $29 billion in spending for 2010- 11, a 4 percent increase over this year.

The governor asserted that his other tax proposals have strong public support and urged lawmakers to approve them.

“These aren't hard votes,” he said. “It doesn't require a 'profile in courage' to vote for things that the public supports.”

Those proposals would impose a severance tax on natural gas extraction, extend the tobacco tax to cigars and smokeless tobacco, close a loophole that allows many companies to escape the state's corporate net income tax, and eliminate a 1 percent incentive for retailers who submit sales-tax money on time.

Erik Arneson, a spokesman for the Senate Majority Leader Dominic Pileggi, R-Delaware, said GOP senators are willing to discuss a severance tax on the burgeoning gas drilling over the potentially lucrative Marcellus Shale formation – something that both they and Rendell agreed was premature last year.

Arneson said he does not detect Senate support for Rendell's other tax proposals.

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