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As Pa. looks to fill budget gap, your utility bills could rise

The Pennsylvania Senate voted to fill a budget gap, in part, by raising taxes on utilities. How will that affect consumers?

Shown is the Pennsylvania Capitol building in Harrisburg, Pa., Monday, July 10, 2017. (AP Photo/Matt Rourke)
Shown is the Pennsylvania Capitol building in Harrisburg, Pa., Monday, July 10, 2017. (AP Photo/Matt Rourke)Read moreAP

If  you have electricity in your house or a phone, Pennsylvania lawmakers want you to help plug the budget's $2 billion gap.

Along with the controversial, highly publicized tax on natural-gas bills, in a vote last month the Senate also approved levies on telephone and electric utilities, which typically pass such costs onto customers.

The revenue package still must go before the House, where its fate is uncertain. "There doesn't seem to be support" for the Senate's package, Steve Miskin, spokesman for the House Republicans, said Wednesday. What their alternatives could be — and if or when the Republican-controlled House would vote on the plan — remain uncertain.

But if the Senate has its way:

  1. Those who heat their homes with natural gas would see a new 5.7 percent tax on their bills. A consumer with a $100 monthly bill would pay $5.70 per month, or $68.40 per year, in new taxes.

  2. Taxes on telephone utilities — including landlines and cellphones — would increase from 5 percent to 6 percent.

  3. Taxes on electric bills would rise from 5.9 percent, to 6.5 percent. Together, the natural gas, electric, and telecommunications taxes would raise more than $400 million per year.

  4. For the first time, Pennsylvanians could buy aerial fireworks – on which they would pay a 12 percent tax, in addition to regular sales taxes. Lawmakers say this could raise $ 2.8 million per year.

  5. Websites that facilitate third-party sales, such as eBay, Etsy, and Amazon Marketplace, would be required to collect Pennsylvania's 6 percent sales tax. Lawmakers say this change would allow the state to collect an additional $43.5 million in the coming fiscal year.

  6. A new severance tax on Marcellus Shale drillers would bring in $80 million annually. Though not a direct tax on consumers, industry leaders warn that it could affect the price of natural gas.

As House members decide what to do with the Senate's solution, industry leaders and advocacy groups are ready for a fight.

Terry Fitzpatrick, president and CEO of the Energy Association of Pennsylvania, said utilities have concerns about the transparency of the taxes.

"We're sort of being used as a collection agent to maybe mask the cost," he said. "It takes the cost of government and it presents it to customers not on your tax bill, but on your utility bill."

One group of residents that would be winners under the new taxes: Those who do not heat their homes with natural gas. Fitzpatrick said only slightly more than half of Pennsylvania residents use natural gas.

Gene Barr, president of the Pennsylvania Chamber of Business and Industry, said he worries that the tax package would take away the state's competitive advantage of having "affordable, accessible natural gas."

Some manufacturing members of the chamber have estimated that they could spend more than $1 million a year in taxes from the new 5.9 percent gross receipts tax on natural gas, Barr said.

While lawmakers are resistant to raising income or sales taxes, Barr said, "our real concern is that raising that [utilities and natural gas] tax actually depresses our economic growth even more."

Meanwhile, Senate leaders called the revenue package a responsible solution for a budget that required difficult choices. Lawmakers have to fill a $1.5 billion gap in last year's budget, and a $700 million deficit in the fiscal year that began July 1.

"I guess some advocate that we shouldn't do anything, we should just sit back and let Rome burn or let the governor come up with $2.2 billion worth of cuts," Senate Majority Leader Jake Corman (R., Centre) said on the Senate floor last month.

But some members of both major parties were among those to oppose the measure, which passed with a 26-24 vote.

Sen. Art Haywood (D., Montgomery) said he would not support the tax increases without also increasing the minimum wage.

"I am not opposed to raising taxes when appropriate," he said in a statement after the Senate vote. "At the same time, when we raise taxes on everyday people, we must consider the impact on their wallets. There are more than one million Pennsylvanians in low-wage and poverty pay jobs."

Sen. Stewart Greenleaf (R., Montgomery) also opposed the tax proposal.

"Throughout the budget process, I have supported pursuing all cost-saving measures before considering tax increases," he wrote in a letter to constituents explaining his vote.

Fitzpatrick, of the energy association, said he has sent emails to House members. Some are sympathetic, he said. But one thing is clear: Even if lawmakers agree with his perspective, there is no consensus on what to do about it.

"There's all sorts of ways to raise money, certainly none of them are perfect and all of them have political downsides for folks," he said. "So there's nothing but tough choices and we realized that."

Miskin said House Republicans are discussing alternative revenue ideas. Representatives had been told to prepare to return for possible votes this month, but no date has been set.

Liz Navritil of the Harrisburg bureau contributed to this article.

A previous version of this article incorrectly stated the Senate's proposed tax rates for natural gas and electric bills.