DN Editorial: Diversionary taxes

STORM CLOUDS are gathering in Harrisburg over the deal to settle the long state budget impasse.

While one group of legislators is still working with Gov. Wolf on hammering out the details of the $30.6 billion plan, another group has launched a maneuver that could kill the whole deal.

If that happens it will mean no state budget for the foreseeable future and almost certainly a shutdown of schools and social-service agencies across the state beginning in January - which is when they run out of time and money.

Instead of hashing out their problems with the existing budget, several conservative Republicans in the state Senate, along with a few Democrats, have taken a different tack and are pushing a bill that would eliminate local school property taxes.

The premise behind Senate Bill 76 sounds good. Pennsylvanians have long complained about local property taxes, which in most counties are used solely to support public schools. (In Philadelphia, property-tax revenue is split between the district and the city.)

Collectively, Pennsylvanians pay a total of $17.6 billion a year in property taxes, according to the latest U.S. Census data.

Under the tentative budget deal backed by Wolf, $2 billion is set aside to reduce property taxes, paid for with an increase in the sales tax from 6 percent to 7.25 percent in most counties. (In Philadelphia, it would go from 8 percent to 9.25 percent.)

Senate Bill 76 easily trumps that cut by proposing to eliminate school property taxes entirely; it would pay for schools by raising the state income tax from 3.07 percent to 4.34 percent and the state sales tax from 6 percent to 7 percent. It also would eliminate many items that are now exempt from the sales tax, including food and clothing.

It's a bad bill for a number of reasons. For one thing, it does not raise enough money to cover the entire bill of eliminating property taxes - in fact, it falls several billion dollars short. No one is saying where that money will come from.

For another, it gives a windfall tax break to businesses, who do pay property taxes but not income and sales tax. At the same time, the sales tax is regressive, increasing the tax burden on middle- and low-income people.

Finally, it cements the inequity in the way school subsidy money is doled out in the state - using a discredited formula that favors rich districts at the expense of poor ones.

Worst of all, though, is the timing. This bill is supposed to come up for a vote in the Senate this week. If it does - and if it passes - it will have to go to the state House and then to Wolf's desk. Wolf has said he will veto it.

But the effect of it moving through the Legislature - at the usual snail's pace - is that it will stop the current deal on the budget in its tracks. In effect, the Legislature and the governor will have to restart negotiations. It took them five months to get the deal we have now.

For practical, political and policy reasons, we urge the Senate to vote down SB76 if it comes up for a vote this week. It needs to be defeated before we can move on to a real deal on the state budget.