Karen Heller: Taxing nothing but patience

Welcome, friends, to the latest installment of "Getting Squat Done in Harrisburg."

In coming years, Pennsylvania faces billions of dollars in revenue shortfall attributable to a stagnant economy, the end of federal stimulus funding, and skyrocketing pension contributions for teachers and state employees, the equivalent of a colossal balloon mortgage come due.

Edward G. Rendell announced the final budget of his gubernatorial reign last week. Needing to address the chasm in projected revenues, Rendell proposed cutting the sales tax but adding 74 new items - count 'em, 74 - to be taxed, many of them previously unfettered by levies. That's because many goods and services, like smokeless tobacco and natural gas and soda, which should be taxed, are tended to by lobbyists like pampered pets.

Moments after Rendell offered the budget, Senate President Pro Tempore Joe Scarnati (R., Jefferson) graciously declared the proposal "dead on arrival."

I'm telling you, in our state capital it's all lollipops and rainbows. Such behavior actually demonstrates that Washington isn't the only place where the Senate serves as a seat of obstruction. To be fair, House Majority Leader Todd Eachus (D., Luzerne) also griped, "We must guard against the tendency to take a slash-and-burn approach to budgeting and simply cut without regard to the human cost."

Almost immediately, you could hear the sound of a hundred lobbyists revving their engines to stop Rendell from taxing their clients. If nothing else, Rendell's proposal is a stimulus bill for lobbyists.

Pennsylvania's sales tax began in 1953, only to have lobbyists chipping away at it ever since. The exemptions in the sales tax are "a testament to the power of lobbyists and special interests," Rendell said last week.

The natural gas industry spent $1 million in the first half of last year successfully lobbying against any tax on the huge bonanza of the Marcellus Shale field, arguing that it would discourage drilling.

Garbage. Natural gas is a drug. Drillers last month paid twice the amount to lease state forests that the state expected to take in. And there's gold in that gas. In 2007, Oklahoma and Texas each raised almost $1 billion in severance, or extraction, taxes.

With the latest round of proposed taxes, state legislators immediately started crying about potential harm posed to the little guy.

True, many proposed taxes, like on dry cleaning and veterinary fees, affect small businesses. But helicopters, natural gas, and cigars have nothing to do with the little guy. Altria Group, formerly Philip Morris, complained that a tax would harm state cigar makers - like Altria, the nation's largest tobacco company.

Rendell wants to increase education funding, the rare instance where the little guy would, in fact, benefit.

The inability to have a dialogue, to even discuss proposed changes, has turned much of what Harrisburg does into a farce. "Many of us had run on a platform of open and accountable government," State Rep. Barbara McIlvaine Smith (D., Chester) writes in today's Currents section of The Inquirer about why, after two terms, she'll leave the legislature. "We were the 'reformers.' We were going to make a difference and get things done. Our enthusiasm was matched only by our naivete. Nothing gets done unless leadership sanctions it."

Tim Potts of Democracy Rising PA, a frequent Rendell critic, says, "I think the governor deserves credit for doing something about this looming problem. There are legitimate gripes here, a lot to discuss. Every day is a field day for lobbyists, and also a field day for people raising campaign money."

Rep. Josh Shapiro (D., Montgomery) is one of Smith's fellow reformers. Though undecided about Rendell's tax proposals, he cautions, "You shouldn't take anything off the table before you have a chance to analyze it. To do so otherwise is irresponsible."

In hard times, you either cut services or raise revenues. Possibly, you must do both. Slamming doors while offering no alternative solutions is lousy governance. Arguing for the "little guy" doesn't work when your little guy is big business and the voter seems inconsequential.

"The fiscal storm is coming," Shapiro cautions.

Ask your state representative and senator where, precisely, the commonwealth is going to cut costs or raise the revenues to operate.

Gov. Rendell proposed cutting the sales tax but ending the exemptions for these products and services:

Accounting, auditing, and bookkeeping services

Administrative services

Advertising, public relations, and related services

Air transportation

Airline catering

All other professional and technical services

Amusement and recreation industries

Architectural, engineering, and related services

Bad debts

Basic cable television

Call-center credit

Candy and gum

Caskets and burial vaults

Catalogs and direct-mail advertising

Charges for returnable containers

Coal

Coin-operated food and beverage vending machines

Commercial vessels (construction and repair)

Commercial vessels (equipment and maintenance)

Common carriers

Construction of memorials

Consulting (scientific, environmental, and technical)

Custom programming, design, and data processing

Dry cleaning and laundry services

Electric (residential)

Electrical, plumbing, heating, and air-conditioning service fees

Financial institution fees

Firewood

Fish feed

Flags

Fuel oil/gas (residential)

Funeral parlors, crematories, and death-care services

Gratuities

Helicopters

Horses sold to out-of-state buyers

Hotel charges (permanent residents)

Information services

Investment-grade metal bullion and coins

Legal services

Liquor and malt beverages bought from retail dispenser

Magazines

Manufacturing exemption (public utility)

Motor vehicles (out-of-state purchases)

Museums, historical sites, zoos, and parks (for profit)

Newspapers

Nonprescription drugs

Other transportation

Other: personal services

Parking lots and garages

Personal-care services

Personal-hygiene products

Rail transportation equipment

Recreational parks, camps, and campgrounds

Rental of films for commercial exhibition

School buses

Scientific research and development services

Services to buildings and dwellings

Specialized design

Spectator-sports admissions (excludes schools)

Stair-lift devices

Telephone (residential)

Temporary usage

Textbooks

Theater, dance, music, and performing arts admissions (for profit)

Tourist-promotion agencies

Transit and ground transportation

Trout

Truck transportation

Uniform commercial-code filing fees

Veterinary fees

Warehouse storage

Waste-management and remediation services

Water and sewage services

Wrapping and packing supplies

SOURCE: Rendell administration

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