I can honestly say that during my 24 years in public service, I have not changed my mind about the basic values I have espoused or the programs I pushed. There is only one big moment that stands out to me as a mistake. I changed my mind about implementing a program, and today I deeply regret it.
When I became governor in 2003, I inherited a $2.3 billion structural deficit. Under the state constitution, we had to enact a balanced budget for the coming fiscal year, so I knew I had to raise taxes. I believed we could dramatically lower state expenditures (and eventually we did decrease the cost of government operation by nearly $2 billion a year). But I knew we could not do so to begin the new fiscal year, just four months away. I was also determined to end the awful state of affairs where Pennsylvania was one of only 10 states that did not contribute one dime to early childhood learning.
So, I proposed a budget that would increase taxes by $2.7 billion, the second greatest increase in the state’s history. I was the first governor in our state’s history to propose increased taxes in his first term.
We planned to raise a number of taxes to bring in that amount of revenue. The biggest was the state personal income tax, which stood at 2.8% when I took office. That was the second-lowest rate in the nation. I proposed raising the tax to 3.75% — less than a full point. Initially, the Republican-controlled legislature refused to consider any increase and we had a nine-month budget stalemate that lasted until Dec. 20. This was not easy, and my office took a lot of abuse for the delay.
Finally, Republicans agreed to a much smaller increase from 2.8% to 3.07%. I knew that this would be a terrible mistake and I would look back and rue the day we left so much revenue on the table.
The average Pennsylvania family earning $60,000 a year would see an increase from 2.8% to 3.07%, equal to $162 a year or $3.11 a week. Our original plan to raise the tax from 2.7% to 3.75% would have cost that family $507 per year, or a little less than $10 a week. I suspected then that while citizens get mad at you when you raise taxes, their anger is no more for a $10-a-week increase than it would be for $3 a week. I knew there would be angst from the constituency, but I did not believe it would be substantial or long lasting. Especially when the weekly paycheck changes so little.
In retrospect, my first instinct was correct. When voters next went to the polls in 2004, not one legislator, either Republican or Democrat, who supported the tax increase was defeated. Had I the courage to hang in there and continue fighting for my original proposal, the state of Pennsylvania would have raised an extra $417 million a year and since 2003 would have raised an additional $28 billion.
Just think what that money could have done for our infrastructure, economy, environment, and educational system. That revenue would have been of vital importance in bettering the quality of life of our commonwealth — if only I had I fought harder and won the day.
Ed Rendell served as the governor of Pennsylvania from 2003 to 2011.