State House Sound Bites

Capitol reporter Katie Meyer covers Pennsylvania politics and issues at the Pennsylvania state capitol.
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Independent Fiscal Office assesses Wolf's budget proposal

Written by Katie Meyer, Capitol Bureau Chief | Apr 20, 2018 4:33 AM
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Wolf's budget proposal for next fiscal year was seen as relatively modest, though GOP leaders in the House and Senate have made it clear, they oppose its new taxes and wage increases. (Photo by AP)

 

(Harrisburg) -- The commonwealth's Independent Fiscal Office has released its yearly assessment of Governor Tom Wolf's budget proposal.

It reports that most of the revenue estimates check out. That is, if Wolf can figure out how to get his ideas past the GOP-controlled General Assembly.

The Democratic governor's fourth budget proposal--and the final one of his first term--brings back a lot of the ideas he's been trying unsuccessfully to pass for his entire tenure.

Key components are a natural gas severance tax, a minimum wage increase to $12 an hour, and a corporate tax overhaul.

IFO Director Matthew Knittel noted, Wolf's estimates for first-year severance tax revenue are about $35 million above his office's projections--but that evens out in later years.

"In most years it's a difference of about $30 million, and for this type of an estimate, that's relatively close," Knittel said.

He expects a severance tax would bring in around $210 million in its first year, and about double that by 2022--though that depends on whether natural gas prices increase as much as expected.

If the minimum wage goes up, Knittel said more than one million full and part-time workers will benefit, but around 33,000 jobs will be eliminated. 

He noted, the commonwealth probably wouldn't lose business to other states, since its $7.25-an-hour minimum wage is already an outlier in the northeast.  

"There might be less of an immediate impact because we're lower to begin with, and many of the surrounding states are higher," he said.

The corporate tax overhaul would broaden the commonwealth's tax base by instituting combined reporting, a practice wherein corporations would report the income of their subsidiaries in other states, not just in Pennsylvania. Meanwhile, Wolf's plan would also winnow down the commonwealth's high corporate net income tax.

Knittel said, like a minimum wage hike, combined reporting would put Pennsylvania more in line with a growing norm.

"More than half the states do this already, and most recently Connecticut and Rhode Island have implemented combined reporting," he said. "A lot of northeast states are currently doing it."

He said the tax changes would bring more money to the general fund in the first few years, but would eventually be a modest loss.

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