Rendell proposes income tax hike

HARRISBURG - Gov. Rendell wants a temporary 16 percent increase in the state's personal income-tax rate to help manage a continued decline in revenues and a projected budget deficit of $3.2 billion.

The governor made the announcement this morning at a stop outside of Pittsburgh. He said he would raise the tax on income, which includes wages, to 3.57 percent from the current 3.07 percent for three years to raise approximately $1.5 billion per year in new revenue.

Rendell also said he still favors hiking the tax on tobacco and starting to tax natural gas extraction.

In 2003, his first year as governor, his administration persuaded the legislature to raise the income tax from 2.8 percent to 3.07 percent.

Before that, the income tax was last increased in 1991, when it went from 2.1 percent to 3.1 percent for 12 months, then dropped to 2.8 percent, according to figures provided by the administration.

Still, the governor's proposal faces a mighty battle in the legislature over the next few weeks. Republicans, including those who control the Senate, have unequivocally said they would not support it. Even some Democrats are wary of doing so, given that next year is an election year.

"We continue to believe the budget can, and should, be balanced without tax increases," said Erik Arneson, spokesman for Senate Majority Leader Dominic Pileggi (R., Delaware). "It is wrong to raise taxes on hard-working Pennsylvanians when so many are being laid off, being required to work reduced hours, and worrying about how to pay their mortgage."

Rendell insists the temporary tax hike is necessary to deal with the effects of the recession and offset even steeper cuts to important state programs and funding.

"Wall Street's greed and need for instant gratification created a global economic crisis which led to giant budget deficits in almost every state in America," Rendell said in a statement. "Our families did not create this mess yet we are the ones who must clean it up. But, we shouldn't balance the budget by eliminating more job opportunities or by shortchanging our children's future with drastic cuts to public education."

The governor is expected to make a stop in Montgomery County this afternoon, and will likely discuss his proposal further.