Gov. Wolf's sales tax expansion would cover child care, nursing homes and more

Written by Ed Mahon, York Daily Record | Mar 16, 2015 9:26 AM

Under Gov. Tom Wolf's proposed budget, dozens of new things would be subject to the state sales tax, from child care services to nursing home services.


The Democrat from York County proposes to raise the sales and use tax from 6 to 6.6 percent effective Jan. 1, 2016, and to broaden the categories covered.

It's part of a budget plan that would also raise the personal income tax and lower school property taxes.

During a budget hearing on Monday, House Appropriations Committee Chairman Bill Adolph, R-Delaware County, called the sales tax proposal "a huge expansion" of items that would be taxed.

"As long as I've been in public office I always heard that a sales tax increase hurts the lower middle income folks and the poor folks the most," Adolph said.

Americans for Prosperity announced last week that it had released a radio ad criticizing Wolf over the plan, saying it will increase the cost of many everyday items, such as soap, diapers and Tylenol. "Even the cost of a Hershey's bar will increase," one of the speakers in the ad says.

During an interview on WITF's "Smart Talk" Wednesday, Wolf was asked about a person living in a nursing home who will have to pay more in sales tax without any property tax reduction. Wolf said people should look at the big picture.

"I'm looking at somebody who will look at his or her entire life and say, 'Is this plan making my life better or worse?'" Wolf said.

Wolf said the economy is a lot different now than when Pennsylvania's first permanent sales tax took effect in the 1950s. "We're just bringing ourselves into the 21st century," he said.

The Wolf administration has said his budget will reduce the total tax burden on average middle-class homeowners by 13 percent.

What's covered

Wolf's proposal would keep some exemptions, including for grocery store food, most clothing and footwear, prescription drugs and tuition for college and vocational training, according to the state Department of Revenue.

Wolf's proposal would eliminate exemptions for a variety of products, including candy and gum, personal hygiene products, newspapers and magazines and non-prescription drugs.

It would also eliminate exemptions for a variety of services, including nursing and residential care and certain legal services.

"It's already very difficult for people to pay for long-term care services," said Kelly Andrisano, executive director of the Pennsylvania Association of County Affiliated Homes.

Elizabeth Brassell, press secretary for the state Department of Revenue, said in an email that nonprofit, for-profit and county-owned nursing homes would be treated the same "because the tax is paid by the purchaser of the services."

But she said any portion of care paid for by the federal or state government would not be subject to the sales tax.

Victoria Connor, CEO of the York County Bar Association, said the sales tax proposal will have more of a negative impact on low-income clients.

Connor said the proposal violates Pennsylvania's constitution, which says all "taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax ."

Connor said Wolf's proposal wouldn't be uniform because not all professional services would be taxed. Physician and dental services would remain exempt under Wolf's proposal.

Brassell said Pennsylvania already taxes certain professional services, such as lobbying, so Wolf's proposal wouldn't violate the uniformity clause.

Wolf's press secretary, Jeff Sheridan, said the state sales tax shouldn't be looked at in a vacuum. He said for the York City School District, the governor's proposal would lead to property tax reductions for both homeowners and businesses.

For child care, while the governor is proposing subjecting that to the state sales tax, he's called for "a very aggressive investment in early childhood education," said Diane Barber, director of the Pennsylvania Child Care Association.

The governor's budget proposal calls for an additional $100 million for Pre-K Counts and an additional $20 million for the Head Start Supplemental Assistance Program.

Barber said she has questions about some of the details of the expanded state sales tax, and she said association leaders will be taking a closer look later this month at the impact of Wolf's proposal.

"It's like anything within the budget the closer we get to the end, the more we know," she said.

Caskets, burial vaults and death care services would be covered by the sales tax under Wolf's proposal.

"This isn't a tax on funeral directors. It's a tax on families in Pennsylvania who have a death in their family," said John Eirkson, executive director of the Pennsylvania Funeral Directors Association.

For some services, personal use would be subject to the state sales tax, but business-to-business purchases would remain exempt.

John Klinedinst, president and CEO of the engineering firm C.S. Davidson, Inc., said he thinks the majority of the work that his firm does would qualify for the business-to-business exemption.

"So it probably will not have a large impact on us, but it will complicate the billing system," Klinedinst said.

Klinedinst is also chairman of the York County Economic Alliance, which hadn't taken a formal position on Wolf's budget plan as of last week.

"There's parts in there for everybody to like and everybody to not like," Klinedinst said. "My opinion is that you have to look at the entire package."

Contact Ed Mahon at 717-771-2089.

What would be exempt and what would be taxed?

Exemptions would remain for:

•grocery store food; most clothing and footwear; prescription drugs and orthopedic equipment; gasoline and motor fuels; physician and dental services; hospital services; tuition (college, vocational training and instruction); residential utilities, including land-line phone, electricity, fuel oil and natural gas; water and sewage services; trade-in value; liquor or malt beverages purchased from bars and restaurants; agricultural purchases by farmers; and most purchases by miners, manufacturers and processors, governmental units, purely public charities, mass transit agencies and common carriers.

Exemptions would be eliminated for:

•candy and gum; personal hygiene products; newspapers and magazines; non-prescription drugs; textbooks; higher education meal plans and fees other than tuition; catalogs and direct mail advertising; cable television; motion picture tickets; performing arts tickets (generally, school and nonprofit events are exempt); spectator sports tickets (generally, school and nonprofit sports events are exempt); admissions to museums, historical sites and similar institutions; amusement and recreation services; recreational vehicle parks and recreational camps; travel arrangement services; waste collection; dry cleaning and laundry services; personal care services; social assistance services; sightseeing and towing transportation; financial investment services; real estate agent and broker services; other professional services; employment services; home health care services; ambulatory health care services; nursing and residential care services; death care services; caskets and burial vaults; construction of memorials; flags; other personal services; airline catering; race horses; uniform commercial code filing fees; investment metal bullion and investment coins.

Personal use of the following services would be subject to the sales tax, but business-to-business purchases will remain exempt:

Legal services other than family and criminal law; accounting services; specialized design services; scientific research and development services; advertising services; administrative and support services; architectural, engineering and related services; services to buildings and dwellings; scientific, environmental and technical consulting services; information services; and custom programming, design and data processing.

Source: List provided by the Pennsylvania Department of Revenue

This article comes to us through a partnership between the York Daily Record and WITF.

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