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Some GOP leaders push for state tax cuts

By Brad Bumsted, STATE CAPITOL REPORTER
Sunday, June 26, 2005
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Brad Bumsted is a state Capitol reporter for the Tribune-Review. He can be contacted via e-mail or at 717-787-1405.

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HARRISBURG -- As state lawmakers work toward passage of a $23 billion spending plan, discussions continue on the possibility of tax cuts for individuals and businesses.

The prospect of pay raises for lawmakers and other state officials remains in the background of budget talks.

Senate Republican leaders are pushing to shave the state's 3.07 percent personal income tax, and many House Republicans are intent on securing a tax cut for business.

Erik Arneson, chief of staff for Senate Majority Leader David "Chip" Brightbill, R-Lebanon County, said his caucus will push for the income tax cuts during negotiations in the week ahead. Reducing the tax by a 100th of a percent or so to 3.06 percent or 3.05 percent would be considered a victory, Arneson said.

The push began in January with the introduction of a bill by freshman Sen. Bob Regola, R-Hempfield, to roll back the income tax rate to 2.8 percent -- the rate in place before the 10 percent increase Gov. Ed Rendell pushed through the Legislature in December 2003.

An estimated $200 million surplus this year is a result of that "over taxing" and should be returned to taxpayers, Regola said. But many Democrats say that extra revenue won't even close a $400 million hole in the state's Medicaid budget.

Kate Philips, Rendell's press secretary, said a "tax cut when we're facing such a grim picture for our most vulnerable citizens would be shortsighted, particularly considering there is no plan to pay for the cut in coming years. It's just not feasible at this time."

The Medicaid program provides health care to 1.8 million low-income Pennsylvanians. In February, Rendell proposed caps in services, such as limiting the number of doctor's visits, hospital admissions and prescriptions.

The goal of House Minority Whip Mike Veon, D-Beaver Falls, is to make sure no one is taken off the eligibility rolls, said his spokesman, Bob Caton.

"The goal here, unquestionably, is to keep everyone on the program even if there are service caps," Caton said.

Much of the Medicaid shortfall is a result of federal budget cutbacks, Caton said.

The overall state budget, according to the state Constitution, must be in place by Thursday. That deadline was shattered in 2003 -- Rendell's first year in office -- when the budget wasn't adopted until December. Lawmakers are predicting that work on this budget will likely continue into early July before they recess for the summer.

Rep. Mike Turzai, R-McCandless, who is coordinating a legislative effort to help the state's manufacturing industry, says there's "real momentum" toward business tax relief.

"There is a real push among legislators to improve the business tax climate in Pennsylvania," Turzai said.

Reductions are possible in the corporate net income tax and in calculations that determine how much tax businesses pay, Turzai said.

Meanwhile, legislators and legislative staffers talk in hushed tones about the possibility of a pay hike. There is no bill or formal proposal. The amount of a proposed increase isn't being disclosed publically. Any proposal that surfaces won't be available until the 11th hour.

Privately, lawmakers say the pay hike discussions that fizzled at the end of the 2003-04 session last November are not dead.

But a pay hike is probably a long shot.

Legislators are paid $69,647 a year. Ralph Cappy, chief justice of the Supreme Court, is paid $155,447. The governor's salary is $155,572.

Two issues with regional impact are pending:

  • Legislation by two Moon Republicans, Sen. John Pippy and Rep. Mark Mustio, to restrict the amount of tax revenue that school districts, counties and municipalities may collect after a property reassessment. To raise revenue beyond the amount collected the previous year, local governments would need to take a separate public vote.

    The legislation has bipartisan support. Allegheny County Executive Dan Onorato, a Democrat, supports the measure.

    Arneson said Senate leadership hopes to bring up Pippy's bill for a vote this week and send it to the House.

  • A proposed reshuffling of the state's tobacco fund could mean less money for research institutions in Pittsburgh. Rendell is proposing to use more of the tobacco money to provide health insurance for more low-income residents. Pennsylvania will receive $11 billion through 2025 from the national tobacco settlement -- a 1998 legal agreement between attorneys general of 46 states and the tobacco industry.

    University of Pittsburgh Chancellor Mark A. Nordenberg told a House panel in March that a 29 percent statewide reduction statewide in medical research funding would be a "big blow" to Pitt's ability to attract more federal money and top researchers.


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