HARRISBURG — State lawmakers kicked off budget hearings on Tuesday bickering over whether to act upon Gov. Tom Wolf’s signature budget proposal -- a revamp of the personal income tax that would generate about $3.5 billion by increasing taxes on those who earn more and cutting taxes on lower-income individuals and families.
Stan Saylor, R-York County, the chairman of the House appropriations committee, dismissed the proposal as “unrealistic.”
Republicans hold majorities in both chambers of the General Assembly and have dismissed Wolf’s plan as unworkable.
Democrats countered that the proposal is needed to provide tax relief for more working people while also generating a needed infusion of state funding for schools.
State Rep. Matt Bradford, D-Montgomery County, said that the current year’s budget was balanced with one-time revenue and even if the federal government provides another round of COVID relief, lawmakers need to come up with a plan to balance the state budget without a federal bailout. Bradford is the Democratic chairman of the House appropriations committee.
Pennsylvania’s current personal income tax law provides for tax forgiveness for families of four with income up to $34,500, but those income levels were set in 2003, said state Rep. Elizabeth Fiedler, D-Philadelphia.
“We need to raise that threshold to help working families,” Fiedler said.
The debate came in the first of close to 40 budget hearings that will be held by the House and Senate appropriations committees in February and March, as lawmakers scrutinize Wolf’s $37.8 billion budget proposal ahead of the June 30 deadline to pass a spending plan for 2020-2021.
Under Wolf’s plan, the state’s personal income tax would increase from 3.07% to 4.49%, a move that the administration projects will increase school funding by almost $2 billion. While the plan calls for an increase in the standard personal income tax, the governor’s plan would increase exemptions for lower-wage workers so that most would see no change or a reduction in their taxes, according to a description provided by the governor’s office.
Republicans said that Wolf’s proposal would violate a clause in the state Constitution that mandates that taxes be levied uniformly by unreasonably extending the tax forgiveness provided to low-income individuals and families.
Wolf’s proposal would eliminate the income tax entirely for a family of four with up to $50,000 in income and provide tax cuts for a family of four with $84,000 in income. The Wolf Administration has estimated that two-thirds of Pennsylvanians would either get a tax cut or see no change in their income tax under his plan.
The state’s Independent Fiscal Office estimates that under Wolf’s plan, a single individual earning $60,000 a year would see a $583 tax increase, a 31% increase, while a single person earning $80,000 or more would see a 46.3% tax increase. For an individual earning $80,000 that would be a $1,136 tax increase.
A family of four with $80,000 in income would see a tax cut of 12.2% or $301, under Wolf’s plan, according to the IFO’s analysis but a family of four with $100,000 in income would see the 46.3% increase, amounting to $1,420 in higher tax bills.
Republicans criticized Wolf’s plan for stretching the limits of a Constitutional clause that allows for tax forgiveness due to poverty.
State Rep. John Lawrence, R-Chester County, said that the tax forgiveness is now aimed at helping people who “can’t afford the necessities” and Wolf’s proposal would vastly expand that to include people who aren’t really living in poverty.
The governor’s plan “strains the credulity of what’s poverty under the law,” he said.
Secretary of Revenue Dan Hassell said that the state’s existing tax forgiveness program has never been challenged and the Wolf Administration maintains that lawmakers could increase the threshold if they saw fit to do so.
“The General Assembly has the latitude to define the concept of poverty in a way that makes sense,” he said.