Reviving a proposal from early in his seven-year tenure, Pennsylvania Gov. Tom Wolf has called for a $4 billion tax plan that would target higher-wage earners.
It could be a non-starter for Wolf, a Democrat who works with a Republican-controlled legislature. GOP leaders on Wednesday called the plan “dead on arrival.”
Wolf called the revenue necessary to balance his $37.8 billion
Wolf also made a supplemental cash request of $5.5 billion to cover current fiscal-year cost overruns, largely for public schools.
Additionally, he wants to raise the minimum wage to $15 per hour by July 2027, and pay teachers a minimum of $45,000 annual.
“We can’t say yet when it will return to normal, or what normal is going to look like,” Wolf said in a video message from the governor’s residence in Harrisburg. Due to pandemic protocols, the governor could not deliver his annual budget address to lawmakers at the Capitol.
Citing an equity theme, Wolf said “everyone should pay their fair share.” He had proposed changing Pennsylvania’s flat income tax while first campaigning for governor in 2014, when he defeated Republican incumbent Tom Corbett. GOP lawmakers, though, have repeatedly raised headwinds.
Wolf’s plan would increase the personal income tax rate to 4.49% from 3.07% to raise roughly $4 billion. The top third of earners would pay more, he said, while low-income exemptions would increase.
“It would be really surprising if anything like this comes out on the other end of the budget process,” said municipal bond analyst Joseph Krist.
“If anything, the politics which drove opposition at the beginning of the Wolf administration have only gotten worse,” he said. “In a logical world, they would sell the liquor business, reform marijuana laws and tax that business, and put in a graduated income tax. But it's Pennsylvania and they have been voting against their own interests as long as I can remember.”
Pennsylvania is one of 17 so-called control states nationwide in which governments monopolize
“Calling this a tax cut is laughable and an affront to small employers and other Pennsylvanians who have struggled to stay afloat under the Wolf administration’s misguided, arbitrary and authoritarian edicts,” said Senate President Pro Tempore Jake Corman, R-Bellefonte.
Mom-and-pop stores would bear the brunt, he added.
Wolf is proposing more than $1.3 billion in basic education funding. It directs all existing state-level basic education funding through a so-called fair funding formula, which the commonwealth enacted four years ago, and includes a $1.15 billion adjustment so that no school district, according to Wolf, is negatively affected.
An additional $200 million in basic education funding would target student achievement.
“I understand, yet disagree with, raising taxes to balance this budget,” said Villanova School of Business professor David Fiorenza. “The small businesses suffered during the pandemic and will bear the burden of the income tax increase as they do not file as a corporation.
“I see where this is going," he said. "Large businesses will be safe from these tax increases. What happened to all the liquor taxes and casino taxes the past few years? I do realize the state shut down most of the state since March and now the taxpaying public will bear the burden.”
The markets, not the state, should decide per-hour wages, Fiorenza said. “If there are increases, then 25 cents to 50 per hour is good. Minimum wage was not intended to be a wage for life. It is a starting point.”
Likewise, he added, individual school districts, not the commonwealth, should set teachers’ salaries.
While Philadelphia Mayor James Kenney’s staff is still examining Wolf’s budget, “we are very supportive of his proposal to better fund public education throughout the commonwealth, including Philadelphia,” mayoral spokesman Mike Dunn said.
“For decades the state has failed to sufficiently fund those districts that primarily serve lower income residents, including Black and Brown Pennsylvania families,” he said. “This budget acknowledges that failing, and proposes a way to eliminate the inequity without posing additional burdens on working-class families.”
