This is the second in a series of blog posts assessing the 2016-17 budget and the budget negotiation process from PBPC and its allies.
Politics takes patience. Victories take time. And that goes for small victories as well as big ones.
While the 2016-17 Pennsylvania budget leaves much to be desired, it does close about half of the structural deficit this year with recurring revenues; that is, revenue that the state will receive year after year. And that revenue mostly comes from a series of good proposals that we at the Pennsylvania Budget and Policy Center have championed over the years.
One is the provision to close the sales tax vendor loophole. Stores, including big box retailers like Wal-Mart and Home Depot, have up until now been allowed to keep a portion of the sales tax revenue they receive from customers. That provision in the tax law in Pennsylvania and other states once had a genuine purpose. Retailers used to have to collect and add up sales tax receipts by hand and then write checks to the state. But technology has long made this discount obsolete. Pennsylvania was one of the last states to eliminate it.
PBPC first called for eliminating the sales tax vendor discount in June 2010. We came back to it again in a review of taxes April 2012; in a paper that called it antiquated in June 2012 and our Better Choices Coalition endorsed it as one of 19 ideas to make the tax system fairer in February 2015. The revenue bill enacted this week caps the discount at $25 per month and brings in $55.5 million for the state.
PBPC first started talking about the bank shares tax when it was broadened and the rate lowered in the tax code passed in July 2013. We came back to it in July and September of the next year when, instead of being revenue-neutral as expected, this change cost the state tens of millions of dollars. Fixing the tax was another one of the ideas put forward by the Better Choices Coalition in February 2015. The increase in the rate of the Bank Shares Tax in the legislation passed last week will bring the state $23.5 million this year.
For many years, PBPC has called for broadening the sales tax in a way that makes it fairer. We pointed to the unfairness of taxing DVDs and CDs purchased in stores but not music and videos downloaded from the internet as early as 2007 and came back to it in this piece in 2009. Those who download movies and videos tend to have higher incomes than those who purchase them in stores. So, by closing this loophole, the General Assembly not only brings $46.9 million in for the current fiscal year, but it also takes a small step toward making our sales tax a bit more fair.
We have long called for increasing and extending tobacco taxes. While they are regressive taxes that do fall more heavily on those with low- rather than high incomes, they also reduce tobacco consumption and thus provide important health benefits to those with low incomes. We called for increasing the cigarette tax in 2009 and again, for the City of Philadelphia, in 2014. We have encouraged the General Assembly to tax smokeless tobacco, cigars, and e-cigarettes many times, including2009, 2010 (twice), and 2015. The increase in the Cigarette tax enacted by the General Assembly last week will bring in $431.1 million this fiscal year, while the addition of taxes on e-cigarettes, smokeless tobacco, and roll-your-own cigarettes will bring in in $64.6 million.
(So far, the General Assembly has not seen fit to tax cigars. Some legislators have defended this exclusion on the grounds that adding such a tax will lead Pennsylvania cigar wholesalers to move to other states. This rationale is pretty hard to credit since only two states, Florida and New Hampshire, do not tax cigars.)
All told, the recurring revenues included in the 2016-17 budget that come from ideas we have identified and championed totals $611 million.
This list above includes what PBPC under the direction of Sharon Ward, my predecessor as director, and Michael Wood, who did the policy analysis, wrote on these tax proposals. They also testified and lobbied about them, and encouraged others to do so.
It took time to bring these proposals to fruition. It took a unique configuration of political forces; in particular, it took a serious structural deficit combined with the reluctance on the part of legislators to increase broad-based taxes in an election year, to get them passed by the General Assembly.
But it also took someone identifying the ideas, doing the research to show that they are plausible, and bringing them to the attention of editorial writers, reporters, and politicians, and then doing it again and again. That’s what we at PBPC do year in and year out with the help of our coalition partners in the labor, human service, education, and advocacy communities, as well as citizens across the state. That’s what our funders who provide the dollars mentioned in the title of this piece enable us to do.
We are going to be putting out a series of blog posts in the next two weeks about the missed opportunities in this year’s budget—missed opportunities to better fund education, human services, and environmental protection on the one hand, and to raise taxes in a way that makes our horribly unfair tax system a little better, on the other. Keeping in mind our small victories will, I hope, help us all stay determined to do the long hard work that will lead to bigger victories in the future.