Click here to subscribe today or Login.
HARRISBURG — Gov. Tom Wolf fleshed out the centerpiece of his election campaign this week, unrolling a bold blueprint for raising and spending billions of new state dollars to slash local school property taxes, boost state spending for education programs and make Pennsylvania’s tax system fairer.
It also revealed some detours that Wolf took along his path from candidate to governor.
An overhaul of Pennsylvania’s flat-rate income tax that Wolf said would enhance revenue and fairness — requiring the wealthiest people to pay more tax while allowing others to pay less — received considerable news coverage during the campaign but did not make the final cut.
And a sales tax increase and restructuring plan that was not prominent in the campaign discussion is now a major source of the money the governor needs to finance his agenda.
Wolf’s sprawling budget plan, which also calls for hundreds of millions of dollars for business tax cuts and billions in borrowing to refinance public pension debt, would boost taxes on income, sales, natural-gas drilling, tobacco and banks to the tune of more than $5 billion once fully in effect.
Around $3.5 billion would provide dollar-for-dollar reductions in the property-tax bills of homeowners in all 500 school districts through the state’s “homestead exclusion” program and $500 rebates to renters with incomes of up to $50,000 under a separate program. Coupled with nearly $1 billion for public schools, prekindergarten programs and higher education, the proposals would push the state’s share of education funding to from one-third to about 50 percent for the first time since the 1970s.
Asked why he rejected the idea of tinkering with the income tax, Wolf said he is satisfied that the property-tax cuts, which target the most money to districts with the heaviest tax burdens and the highest poverty rates, would inherently help offset income inequities.
“This is a very progressive tax system that we’ve come up with,” he said the day after his budget address to the Legislature.
In his campaign, which he launched with $10 million of his own money, Wolf toyed with the idea of excluding more middle-class households from the income tax while requiring wealthier taxpayers to pay more. He said it would raise money for property-tax cuts and make the tax more equitable.
“I’m looking at it from the point of view of fairness. I think people like me should pay more. I think people who are starting out, building a business, starting a family, should pay less,” he said in a July interview with The Associated Press.
But Wolf had been vague about where he would draw the line between higher and lower taxes, saying he lacked enough information, and he took editorial flak. He said this week he would not pursue it further.
Instead, Wolf proposes to simply increase the tax rate from 3.07 percent to 3.7 percent — an increase of more than 20 percent — to generate more than $2 billion in the year that starts July 1.
The only other major change would expand, for the first time since 2004, the “forgiveness” provision that excuses the lowest earners from some or all of the income tax. It would allow a family of four earning about $36,000 to pay no income tax, compared with $32,000 under current law.
The proposed 10 percent increase in the sales tax, from 6 percent to 6.6 percent, and the repeal of exemptions for selected services and other transactions is likely to be more lucrative. The changes, slated to take effect in January, are expected to generate $1.6 billion in the first six months alone.
Items that would be newly taxed include candy and gum, cable TV, personal hygiene products, investment coins, newspapers, horses, magazines, non-prescription drugs, airline catering, textbooks, flags and caskets. Food, clothing and prescription drugs would remain exempt, as well as many services.
“I think we ought to bring that sales tax into the 21st century,” Wolf said. “The economy was very different in the ’50s than it is now. Services weren’t as big a deal as they are now.”
“I’m comfortable with the progressivity that I’m introducing,” he said.