By Todd Brysiak
Several weeks ago, I posted up one evening on a barstool in my basement and began mulling over some work documents. Among them was the slide show for Governor Tom Wolf’s 2020-21 Mid-Year Budget Briefing.
Now, I’ve looked at this little snippet of budgetary news every December going back almost 18 years. It’s not as if this was some new, shiny object that caught my attention. In fact, it was the exact opposite.
But as I casually buzzed through the slides and charts that evening, I came to a hard stop on the last page when I saw a bullet point promoting a “more progressive tax system.”
I remember thinking, “well that’s interesting.” In fact, I may have even said it aloud.
This certainly wasn’t the first time I’d ever seen or heard those words tied to policy concepts advocated by the Wolf Administration. But this was the first time I could recall seeing the governor and his team make such an overt reference in a formal, public presentation.
So, leading into last week’s budget address, I was very curious to see how this “progressive” theme might come into play. I had a feeling it would be personal-income-tax (PIT) centered, but what I didn’t anticipate was the scope of this plan and the aggressiveness with which it was proposing to change the state’s tax structure.
As we now know, the governor wants to increase the state’s PIT rate from 3.07 to 4.49 percent while exempting a significant group of lower-income wage earners. It represents a monumental shift in the way our state’s income tax policies are levied.
The plan presented one of those “wow” moments for a lot of folks – me included.
We all know the governor has never been shy playing with the PIT rate. Say what you want about his budget plans over the years, but he’s not afraid to go big.
But was this one too big? And if so, what does this mean for the budget talks?
I had a front row seat for the governor’s first major push on the PIT back in 2015. That budget was an everything-including-the-kitchen-sink plan that was followed by a 9-month impasse. Those of us who were in the trenches still have some scars from those negotiations.
So, when this new PIT proposal hit the streets last week, I wondered if others were feeling a bit of déjà vu.
Following the address, I talked with several lawmakers, staffers and lobbyists to take their temperature on what the governor proposed. On several occasions, folks said they felt that this plan had all the makings of another 2015. And on face value, they probably had a legitimate a point.
Lawmakers on both sides wasted no time in offering their thoughts and certainly weren’t holding back their opinions on the plan. I mean, if you’re a fan of bold sound bites, then last week was akin to political gold.
The governor and his allies immediately pressed this as a historic tax cut for lower-wage workers and their families. And to be fair, there are a lot of people who would see income taxes either cut or eliminated under this new policy. That can’t be denied.
But on the flip side, legislative Republicans and more conservative advocates were not wrong when they argued the potential impact to small businesses. Whether justified or not – I’m not here for that debate – these employers have been among those most directly impacted by the pandemic restrictions. And given that most of these businesses pay the PIT, they are now being asked to give a lot more in taxes at a time when some are barely keeping afloat.
As I listened to all these points and the varied debates over a nearly $40 billion spending plan in the middle of a pandemic recovery, I too began to wonder if we were looking at a replay of the 2015 budget.
Could this really get that bad again?
Rather than jump to a response, I instead kicked this around in my own head over the past few days, and I’ve come to this conclusion: even though this seems to have all the makings of budgetary slugfest, that outcome really seems unlikely to me.
First, everyone involved in the 2015 battle learned a lot from it. And in the time since, the Wolf administration and the Republican-led majorities in the legislature have found a way to make divided government work – even amid some very hostile political environments. And, frankly, they all should be applauded for that, because it’s not easy.
Additionally, if the Biden administration and Congress can pull together a new stimulus package, then there’s a good chance some of the budget pressure valves will be released as new federal dollars flow to Pennsylvania. If that happens, which I think is pretty likely, it will change the current face of the pending deliberations and the related tax talks. It doesn’t necessarily mean they go away, but the context in which they’re discussed is dramatically different.
Look, we all know that any chatter on new revenue is always going to face a contentious debate in Harrisburg, especially if it includes taxes. But that doesn’t mean these talks should never occur. Understanding how government funds its operations and what might be the best way to do it moving forward should be a priority for everyone.
Whether this budget debate gets down to a new PIT rate come June 30 is very much yet to be seen. But regardless, this is why those with a vested interest should be paying extra attention over the next few months. Because with so many moving parts in a period full of so many unknown scenarios, perspectives can shift rather quickly, and so can decisions.
And trust me, when they do, you don’t want to be on the wrong side of a decision. Because they are hard to move back.