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Pa. lawmakers eye higher cigarette tax to help close budget gap

HARRISBURG, Pa. — Some state lawmakers have eyed a severance tax on natural gas extraction as the revenue hero that could swoop in at the last minute to save Pennsylvania's struggling budget.

But could it have a sidekick, too?

On Monday, state Sen. Anthony Williams, D-Philadelphia, raised the possibility that hiking the state's cigarette tax to $2 a pack had bipartisan appeal and, like a severance tax, could be gaining traction.

When paired with the severance tax — which Senate Minority Leader Jay Costa, D-Allegheny, believes could raise $700 million — a higher cigarette tax could go far in helping plug a budget deficit that could be out of balance by $1.7 billion next year, thanks in part to lagging revenue.

A 40-cent increase to the cigarette tax could bring in $200 million, even with an anticipated 15 percent drop in sales because of the more expensive tobacco, Democratic staffers said.

"It's another one of those revenue options that are on the table," Costa said.

Asked about the possibility of a cigarette tax increase, Erik Arneson, a spokesman for Senate Majority Leader Dominic Pileggi, R-Chester, said, "It's too early to start speculating about any specific idea." He said GOP lawmakers this week would talk about a budget sans a revenue increase.

"Beyond that, I can say that everything's on the table," he said, adding a caveat. "Nothing is final, no decisions have been made."

Steve Miskin, a spokesman for the House GOP, said members haven't discussed a cigarette tax. Instead, representatives are examining every line item, considering the future viability of some tax credits, and again focusing on the possibility of privatizing the state's liquor stores for a jolt of revenue, he said.

A gas severance tax, despite having bipartisan support in the General Assembly, is something of a longshot. Republican Gov. Tom Corbett has been adamant in his opposition to further taxing the drilling industry.

The state's revenue was $108 million below estimates in May, leaving the current fiscal year shortfall at $612.5 million after adjusting for a transfer of liquor store profits. Lawmakers have until June 30 to pass a budget for 2014-15.

Andrew Staub can be reached at Follow @PAIndependent on Twitter for more.

The Pennsylvania Independent is a public interest journalism project dedicated to promoting open, transparent, and accountable state government by reporting on the activities of agencies, bureaucracies, and politicians in the Commonwealth of Pennsylvania. It is funded by the Franklin Center for Government and Public Integrity, a libertarian nonprofit organization.