HARRISBURG - In one of the first major concessions in the three-month Pennsylvania budget impasse, Gov. Wolf on Tuesday backed off his demand to raise the state sales tax, but is still pushing for new education funding by hiking the personal income tax and imposing a new tax on natural gas drillers.

Republicans said the changes were unlikely to help the plan pass a critical House vote Wednesday. GOP leaders have called for the vote to show the Democratic governor his proposals to hike broad-based taxes - sales and personal income - lack support.

"At some point, we've got to vote somebody off the island - and if it's got to be broad-based tax increases, so be it," House Majority Leader Dave Reed (R., Indiana) told reporters, predicting the measure will fail. After three months of budget negotiations yielded no significant progress, Wolf has been trying to rally support to pass the revised $30 billion spending plan, one that would impose new taxes and restructure others.

In the latest proposal, he abandoned his call to raise the sales tax from 6 percent to 6.6. percent. He also moved away from his proposed $1 per-pack cigarette hike, as well as new taxes on smokeless and loose tobacco, cigars, and e-cigarettes.

But the plan would still raise the personal income tax - from 3.07 percent to 3.57 percent; and impose a new, 3.5 percent tax on natural gas drillers, plus a per-cubic-foot fee on gas, on top of the existing impact fee they now pay.

The last time the income tax was raised was in 2003 under Gov. Ed Rendell - and only after a protracted budget standoff.

Democrats on Tuesday said low-income families and seniors would not be impacted by the proposed income tax hike because Wolf's proposal also would expand the tax forgiveness provision to mitigate the impact on them.

Under the proposal, a married couple with two children would pay no personal income tax if their household income is at or below $36,400 (under current law, it is $32,000), according to an analysis by the House Appropriations Committee.

In all, the administration projects the new taxes would raise more than $1.4 billion in this fiscal year, and more than $2.4 billion in the fiscal year beginning in July 2016. A good chunk of that money would go to public schools, which would see a $400 million boost in basic education funding. The new revenue would also be used to eliminate property taxes for an additional 216,300 seniors and 31,000 households with disabled residents.

Wolf has warned that if the state doesn't change its revenue formula, it will again be looking at a $2 billion deficit for the next fiscal year.

Even if the governor gets the support of all 84 Democrats in the House, he still will need to pick up nearly two dozen Republican votes for his plan to pass. House Republican spokesman Steve Miskin said he was not aware of any Republicans in the 203-member chamber who had pledged to support the proposal.

The state has been operating without a budget since July 1, cutting off funding for counties, school districts, and nonprofit organizations that provide social services. Last week, the governor ordered a hiring freeze and travel restrictions on state offices.


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