by Lowman S. Henry | December 23, 2003

Budget battle ends with the usual tax and spending increases

The Brookings Institution last month released a report that academically catalogued the problems and challenges facing Pennsylvania today. From brain drain to economic stagnation Brookings listed our shortcomings. They then pronounced governmental efforts to address those problems as inadequate and inept.

Unfortunately, the Brookings study got it right – up until that point. But when they went on to blame Pennsylvania’s problems on poor land use planning and so-called urban sprawl, they missed the core underlying reasons why the once mighty Keystone state has been hemorrhaging jobs and population.

The real reason for Pennsylvania’s economic malaise could be found on the front pages of any newspaper in the state over the Christmas holiday. After six months of fighting over the state’s budget, the governor and legislative leaders arrived at a tried and true Harrisburg solution – tax everything in sight.

And so they did. From personal incomes taxes to cellular telephone taxes, “revenue enhancements” as they are euphemistically known under the Capitol dome were raised on just about everything and everyone who hasn’t left the state yet.

It leaves you wondering what all the fuss was about. Pennsylvania was the last state in the nation to get its entire budget in place. Since the eventual outcome was the same old same old, the extended wrangling ended up making no sense at all – even for government.

Some Republicans, and even a few fiscally responsible Democrats, have for months proclaimed the need to avoid another “1991.” That’s a reference to the massive state tax hike enacted that year which ultimately triggered a decline in our business climate from which we have yet to fully recover. In the end, it was 1991 all over again.

Several years ago there was a movie entitled “Groundhog Day” in which the central character was a television news reporter assigned to cover the annual events in Punxsutawney. He went to bed repeatedly only to wake up the next morning to find it was still Groundhog Day.

Pennsylvania is stuck in a fiscal Groundhog Day. Enough Republicans in both the House and Senate abandoned their principles and handed Governor Ed Rendell the huge increases in both taxes and spending he has been demanding for months.

Like the aftermath of the 1991 debacle, the negative effects of the massive new tax burden being placed on the shoulders of Pennsylvanians will have an adverse effect on our state’s economy for years.

The biggest hit will be on Pennsylvania families. The 10% increase on the personal income tax means hard working families will see more of their money taken from their paychecks by state government, leaving less to provide for family needs. That will adversely affect consumer spending, which will hurt businesses and result in job losses. The Commonwealth Foundation reports the tax hike will remove $1.4 billion in disposable income from families, and result in the state having 33,140 fewer jobs.

At a time when state budget-makers should have tighten their belts and found a way to lower taxes in order to make our state more competitive, they instead raised taxes and increased spending thus ensuring our citizens will not enjoy the resurgent economy now coursing through the rest of the nation.

The full menu of tax increases are good news for at least one business. U-Haul will make a fortune on one-way rentals as more and more people leave the commonwealth to live and do business in states where they can keep more of what they earn.