Federal spending debate could hurt PA revenues

(Harrisburg) -- Tax changes from Washington, D.C., could be hurting the commonwealth's revenues.

Independent Fiscal Office Director Matthew Knittel estimates that the end of the "payroll tax" break at the end of 2012 will reduce Pennsylvanians' disposable income by some five billion dollars.

Knittel also points to the massive federal spending cuts known as sequestration, and the debt ceiling debate, as factors that can also hurt the economy.

"We saw that a year-and-a-half ago with the prior debt ceiling," Knittel says. "When the debate was under way, the sales and use tax collections fell, consumer confidence fell, and there's potential to repeat that again this year."

Knittel says state revenue growth is expected to be weak next year.

He says the state's unemployment rate will drop to between 7 and 7.2 percent next year.

The commonwealth's unemployment rate was 7.9 percent in December.