GOV. ED yesterday handed the Legislature an either/or plan for Pennsylvania.

Enact sweeping sales-tax changes and go after more corporate taxes, or do neither, pass a basic budget and get out of town in an election year.

Given lawmakers' penchants for doing as little as possible and addressing crises only after they occur, the do-neither-get-out-of-town option looms large.

One tipoff? Except for applause for military and Haiti relief-related guests at the governor's annual budget address before a joint legislative session in the Capitol, the loudest response from lawmakers came at the mere mention of getting (for a change) a budget passed on time.

Tipoff two? Immediately after Rendell's 59-minute speech, Republican Senate Leader Dominic Pileggi said of Ed's plan, "I don't think it has any support in our caucus." If that wasn't clear, GOP Senate President Joe Scarnati added, "It is dead on arrival."

Still, His Edness' ideas are interesting.

They're based on projections that federal stimulus dollars drying up next year will create a $2.4 billion state deficit and that, combined with a pension deficit for retired state workers and public-school teachers, will create a $5.6 billion budget hole the following year.

To protect against dramatic tax hikes and/or draconian cuts to pay for these problems, Rendell proposed expanding the sales tax to 74 categories now exempt, while reducing the rate from 6 percent to 4 percent statewide (8 percent to 6 percent in Philly).

The expansion would apply to everything from firewood to fish food, candy to caskets, and include newspapers, magazines, basic TV, accounting and legal services, parking lots and garages, veterinary fees, home phones, dry-cleaning, sports and theater tickets, admission to museums and zoos, and more.

Such a move, said Ed, means $531 million this year and $1.4 billion by next fiscal year while proving "neutral" to most taxpayers. The average family, he said, actually saves $17 a year.

But House GOP Leader Sam Smith quipped, "It can't be a wash if it's generating more money," insisting that somebody, somewhere pays.

Rendell also called for closing the "Delaware loophole" that allows corporations doing business in the state but registered elsewhere, mostly Delaware, to avoid the state corporate net-income (CNI) tax.

He said that nearly two-thirds of businesses don't pay the tax. If the "loophole" is closed, he'd drop the CNI rate from 9.99 percent rate to 8.99 percent. Democrats tried for years to close the "loophole."

Rendell also reissued past-failed calls to tax smokeless tobacco, cigars and the extraction of natural gas from Marcellus shale.

The governor, long wise in the ways of politics, concedes that his proposals amount to "an uphill battle." He labeled his sales-tax change a "Lobbyists Relief Act," since every interest affected will work against it, and said that the business community would "fight like cats and dogs" against paying the CNI.

Still, he said, "it's the right thing to do" and "worth a try."

He also, as expected, asked for more for education - $354 million more - as part of a $29 billion general-fund budget that represents an overall spending increase of $1.15 billion, a 4 percent jump. It's his last budget as governor.

He mentioned reforming campaign finance and redistricting, and ending election of judges, all old saws that brought modest or no audience reaction.

The core of Ed's plan, a lockbox, rainy-day set-aside of money from a broadened sales tax, a natural-gas tax, corporate and tobacco taxes starting in September would bring in $874 million by June 2011 ($2.3 billion over the next two years) and could not be used until July 2011.

Because it makes so much sense, the plan is all but certainly doomed. In fact, Rendell said if the Legislature rejects the notion and passes a basic budget with more for schools he'd "reluctantly" sign it. He called such rejection "a huge missed opportunity." I call it business as usual. *

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