HARRISBURG – Lancaster County Senators Ryan P. Aument (R-36) and Scott Martin (R-13) raised serious concerns today about the massive tax hikes and unsustainable new government spending included in Governor Tom Wolf’s 2021-22 budget proposal.
Governor Wolf’s $40.2 billion proposal would boost state spending by a whopping a $3.1 billion (8.2 percent) over the current year’s budget. If enacted, the spending increase would be the largest growth in the cost of state government in Pennsylvania’s history.
The governor’s new spending would be primarily financed by a Personal Income Tax (PIT) increase totaling more than $3 billion. Under the plan, the PIT rate would increase from 3.07 percent to 4.49 percent, a 46-percent increase. A small portion of that tax would be forgiven for low-income workers, but the net impact on Pennsylvania families and employers would still exceed $3 billion annually.
“Now is certainly not the time to ask our struggling small businesses to pay more taxes,” said Aument. “After suffering nearly a year of punitive shutdowns, capacity limits, and strict regulations, these small businesses are working desperately to reopen and rebuild what they’ve lost as a result of the Governor’s mitigation orders. Just as they’re getting their feet back under them, the Administration wants to hit them with a historically large tax increase that would be absolutely job-crushing during a time when we should be doing all that we can to support our small business community.”
“After all we have endured over the past year, the last thing that Lancaster County residents need right now is a smaller paycheck,” Martin said. “Many small businesses that are the lifeblood of our economy pay the PIT too. It is estimated that around one million small businesses in Pennsylvania would be negatively impacted by this plan. It would be the final nail in the coffin for many of these businesses that have already been decimated by the governor’s arbitrary shutdown orders.”
The governor’s budget address also called for an increase in the state’s minimum wage to $15 an hour. Previous analysis of the plan found that it would cost Pennsylvania thousands of jobs and would have the greatest negative impact on low-skilled workers.
“The reckless policy initiatives included in Governor Wolf’s budget proposal are a clear indication that he is still operating in an echo chamber and refusing to seek outside input from the communities and residents his proposals will impact,” said Aument. “To propose raising the minimum wage so dramatically at this point in time is tone deaf and out of touch with the actual struggles of working-class Pennsylvania families. At the bare minimum, any business that was forced to fully or partially close during the pandemic should be exempt from the minimum wage increase and should have their overall tax burden reduced, not increased.”
A large part of the new revenues generated by Governor Wolf’s tax increases would be earmarked for education. The budget would increase Basic Education funding by more than $1.3 billion, a 19 percent increase. However, the additional funding is directly tied to the $3 billion in new taxes proposed by the governor, which are unlikely to garner much support in the General Assembly, Martin said.
“I am deeply concerned that Governor Wolf is creating a sense of false hope and setting our schools up to be disappointed by proposing such a massive increase in education spending that is completely unsustainable by our current state revenues,” said Martin, who was recently appointed Chair of the Senate Education Committee. “I am hopeful that we can find a way to provide some boost to education spending, and I am committed to ensuring schools have the resources they need to educate our young people. However, the money simply isn’t there to support the kind of funding increase the governor is advocating.”
Governor Wolf also proposed an additional multi-billion-dollar spending proposal to support workforce development, child care subsidies, broadband deployment and his other priorities by enacting a new severance tax on natural gas. The tax would be levied in addition to the current impact fee on natural gas providers, as well as all the other taxes paid by Pennsylvania companies. The new tax would lead to higher energy costs for consumers, which is especially worrisome during these economic conditions, the Senators said.
Wolf’s plan would allow the state to borrow against future taxes paid by the industry, meaning the governor could spend billions of dollars over the next two years, while taxpayers would be paying the bill – including potentially billions in interest costs – for the next 15-20 years.
The governor’s budget and spending plans also rely heavily on revenue from the legalization of recreational cannabis, despite cannabis revenues falling well short of projections in many other states that have legalized it. Also, the Senators noted that Pennsylvania lacks a fast and reliable means of determining drug intoxication of drivers.
“To suggest that Pennsylvania would somehow be able to line state coffers with revenue from the legalization of recreational marijuana despite the fact that other states where it is already legal have yet to experience the significant revenue promised by advocates and the industry is foolish,” said Aument. “Studies have found that for every dollar raised in recreational marijuana tax revenue in Colorado, the state spends about $4.50 to mitigate the negative impacts of legalization, thereby negating the revenue entirely. So not only does recreational marijuana fail to generate significant revenue, but it actually costs the state money to regulate its use.”
“The governor seems to think that we can enjoy a windfall of cannabis revenue in Pennsylvania without any of the consequences seen in other states that have legalized this drug,” Martin said. “This is exactly the kind of shoot-first-and-ask-questions-later approach that doomed the state’s pandemic response. We should not repeat these mistakes now.”
CONTACT: Ryan Boop (717) 787-4420 (Senator Aument)
Terry Trego (717) 787-6535 (Senator Martin)