HARRISBURG, May 11, 2016 – At a news conference held at the state capitol today, State Senator Art Haywood joined Senate Democratic colleagues and community leaders calling for tax reform to protect middle and low-income Pennsylvanians. At the event, Haywood introduced legislation – Senate Bills 1257 and 1258 – that would reduce the tax burden for everyday Pennsylvanians.
“At a time when our state and nation seem rigged against working people, when our minimum wage remains outrageously low, when schools and social services have been drained of funds – it is a crime that our commonwealth’s tax system is also stacked against everyday citizens,” Senator Haywood said. The Institute for Taxation and Economic Policy placed Pennsylvania on the “Terrible Ten” list of states for unfair taxation in 2015. The researchers found that low-income Pennsylvanians pay three times the tax share of the wealthy in Pennsylvania, while middle-income earners pay twice as much as the well-off.
Senator Haywood introduced a two-part legislative package at the press conference, noting that he was open to additional suggestions for inclusion in the reform effort. First, SB 1257 would amend Article VIII, Section 1 of the Pennsylvania Constitution to allow for graduated taxation of income. The amendment would make it possible for Pennsylvania to tax middle income families at a lower rate than those who are high-income. All of the states surrounding Pennsylvania have graduated taxation according to data from the Tax Foundation.
Second, SB 1258 would impose a 4% tax on non-wage, non-interest income classes that are concentrated among the most affluent. The tax would apply to net profits; dividends; net income derived from rents, royalties, patents and copyrights; gambling and lottery winnings; and net gains derived through estates and trusts. According to the Pennsylvania Budget and Policy Center, this legislation could add up to about $1.2 billion in revenue by the end of the 2017-18 fiscal year.
“While Pennsylvania is struggling to manage a more than $1 billion deficit, we cannot afford to continue requiring low and middle income families to pay double or even three times as much as the wealthy,” Haywood said. “What we need is a balanced tax system.”
SB 1258 complies with the Pennsylvania Constitution’s uniformity clause. In Aldine Apartments, Inc. v Commonwealth, the Pennsylvania Supreme Court decided the uniformity clause requires all taxes to be uniform “upon the same class of subjects” so long as a reasonable, non-arbitrary distinction exists relative to classification. Additionally, the bill’s impact on small businesses would be limited. Under current Pennsylvania law and regulations, if owners of small businesses classified as “S” corporations are employees of the corporations, their income could be classified as “compensation,” and would not fall within the classes of income impacted by SB 1258.
Joining Haywood in support of the legislative reform package were Senate Democratic leadership Jay Costa and Vincent Hughes. Senator Larry Farnese also voiced his support in a statement. “By ‘fair tax reform’ we mean taking the pressure off the people who can least afford to pay for the corporate welfare handouts that have increased under Republican leadership,” Senator Farnese said. “Fair is fair. The people and businesses at the top must stop depending on the people at the bottom to keep them afloat.”
Community leaders representing Pennsylvania’s Choice, a newly-formed non-partisan coalition for a balanced state budget, advocated for the legislation. Marc Stier of the Pennsylvania Budget and Policy Center and Susan Spicka of Education Voters PA, both member organizations of Pennsylvania’s Choice, said the bills could bring important changes to the commonwealth: “Pennsylvania’s uniformity clause has made it difficult to adequately fund services like education while protecting everyday people from high taxes. By amending our state’s constitution, we can ensure middle-class and working people are not unfairly burdened with high taxes,” said Stier. “At the same time, implementing a tax on classes of income concentrated among the wealthy would create a more balanced tax system for all of us without any constitutional changes.”
As 2016-17 state budget conversations focus on addressing the structural deficit facing the commonwealth, dozens of community organizations across the state have joined Pennsylvania’s Choice to advocate for sustainable new sources of revenue as an alternative to continued cutbacks. Senator Haywood has supported Pennsylvania’s Choice, and says his legislation would soften the impact of tax increases on middle and low-income families.
“My hope is that this reform package opens up a responsible revenue discussion in Pennsylvania that looks at the real impact of our budget on everyday people,” Haywood said. “We must lay the groundwork to pay for schools, troopers, nursing home care and other state government services by protecting both the middle-class and those living paycheck-to-paycheck from shouldering the heaviest tax burden in our state.”
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Contact: Melissa Ostroff
Phone: 717-787-1427
mostroff@pasenate.com
Harrisburg – Feb. 9, 2016 – Facing an unfinished 2015-16 budget with the need to reconcile a 2016-17 spending plan that has a looming $2 billion deficit, Gov. Tom Wolf was forced to focus his second state budget proposal on education and deficit reduction, according to Senate Democratic Leader Jay Costa (D-Allegheny.)
“Lawmakers have choices to make about Pennsylvania’s future; deal with tough issues up front or watch Pennsylvania wither as a consequence of self-inflicted fiscal wounds,” Costa said. “We need to come together and negotiate a bipartisan budget with the governor that makes key investments in education and deals with a $2 billion structural deficit.”
Wolf presented his $32.7 billion spending plan before a joint session of the General Assembly today. The plan uses the $30.8 billion yet-to-be-enacted budget agreement from last fall as the foundation for this year’s plan.
For 2016-17, the governor calls for $200 million more in education funding, $50 million for special education and an additional $60 million in pre-K dollars. The budget also focuses on tackling the estimated $2 billion deficit in 2017 with a revenue enhancement package.
“It is incredibly frustrating to deal with issues year after year because there is no political will in the state House to finish the job it was sent to Harrisburg to do,” Senate Democratic Appropriations Chair Sen. Vincent J. Hughes (D-Philadelphia) said. “We need to complete the 2015-16 budget and get to work in dealing with those issues that are holding us back.
“Lawmakers can address the deficit and invest in education as a simple, direct approach that will pay dividends for years to come or they will have to explain why deep long-lasting cuts have to be made again.”
In his speech, the governor painted a picture of Pennsylvania’s landscape if there is continued inaction on adopting a reasonable forward-looking budget. He said property taxes will rise, human services will be stripped of funds and drug assistance programs for seniors would be slashed.
Senate Democratic Whip, Sen. Anthony H. Williams (D-Philadelphia/Delaware) said it is unwise for Pennsylvania to continue to jump from one fiscal crisis to another and that a bipartisan budget is a necessity.
“The negotiated agreement that passed the Senate in December proved that a bipartisan budget could be crafted even in a very partisan environment,” Williams said. “That spending plan included healthy education investments, support for job creation, human services, seniors and our most vulnerable.
“This budget plan makes lawmakers face up to the reality that if nothing is done to address the budget deficit than its growth will swamp all other initiatives.”
The proposed budget for 2016-17 is built from the budget agreement that awaits a final vote in the state House. However, if there is continued inaction there will be a $500 million deficit by the end of the year that will balloon to a deficit in excess of $2 billion next year.
The governor also said if lawmakers refused to act, funds for state-related universities (Penn State, Pitt, Temple and Lincoln) would be eliminated, another $1 billion would be cut from basic education, human services funding would be reduced by $600 million, and property taxes would skyrocket.
Wolf proposed a revenue package to deal with the deficit and make education investments. His plan would include an increase in the Personal Income Tax from 3.07 percent to 3.4 percent, sales tax expansions, taxes on tobacco, banks and the imposition of a new 6.5 percent tax on shale drilling.
“The Senate worked with the governor in a bipartisan way to produce an accord last year that would have addressed many of Pennsylvania’s most pressing issues,” Hughes said, noting that the bipartisan budget passed the Senate 43-7.
The legislature will soon begin a series of budget hearings to examine Gov. Wolf’s 2016-17 budget in detail.
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Harrisburg – Dec. 29, 2015 – Senate Democrats provided the following reaction to Gov. Tom Wolf’s line-item veto of a Republican budget plan. The governor released six months of emergency funding for schools and human service programs, or $23.39 billion of the House Republican’s original $30.3 billion proposal.
Senate Democratic Leader Jay Costa’s (D-Allegheny) remarks follow:
“The governor’s action today will hopefully force House Republican lawmakers back to Harrisburg to finish work on a responsible spending plan. Legislators need to return to business and work toward the passage of the $30.8 billion budget framework agreement.
“The House Republican budget was $500 million out of balance. It does not address the $1.3 billion structural deficit that has hobbled state government and simply continued Corbett-type budgeting for another year. After the House Republicans walked away from a responsible budget plan last week, the governor had few options.
“The governor’s release of six-months of emergency funding for schools and human service programs pushes money to schools and programs that are confronted by serious financial challenges.”
Senate Democratic Appropriations Chair Sen. Vincent J. Hughes (D-Philadelphia/Montgomery) on the line-item veto:
“The purposeful decision of House Republicans to repeatedly stonewall the agreed-to framework budget has left Pennsylvania’s school system on the brink of collapse, so I applaud the governor’s decision to approve emergency funding for school districts throughout the commonwealth.
“Our schools have gone above the call of duty to keep their doors open. They cannot continue to do that, nor should we allow that to happen.
“Pennsylvania’s financial situation remains an urgent one despite the governor’s action today. Members of the House GOP need to get back to Harrisburg as quickly as they left and approve the agreed-to framework 2015-2016 budget because this is short-term help. Schools will close if the leadership in this lone caucus continues its bad behavior.”
Senate Democratic Whip Sen. Anthony Williams (D-Philadelphia/Delaware) provided the following statement on the governor’s action:
“The organizations that operate in the shadows of Pennsylvania life are closing their doors because of House Republicans are willfully and callously ignoring their plight.
“Our human service agencies needed a relief valve from the unfair financial burden being placed on them by one of the four legislative caucuses, and Gov. Wolf rightly gave it to them.”
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Contact: Stacey Witalec
Sen. Jay Costa
717-877-2997
switalec@pasenate.com
Harrisburg – Oct, 20, 2015 – State Senate Democrats today called on the Pennsylvania state treasurer to “stop payment” on a scheduled disbursement of property tax revenue headed to charter schools. They have sent a letter to state Treasurer Tim Reese formally asking for the withholding of the money.
“Charter schools are seeking gaming tax relief funds based on one legal interpretation, while public schools and many public officials have a different view of the law,” state Sen. Democratic Leader Jay Costa (D-Allegheny) said today. “The treasurer should not release one dime until there is legal clarity and outstanding issues have been resolved.”
Charter schools contend that they are due disbursement from funds generated from gaming revenues. Typically, when a state budget is adopted, charter school funding is deducted from basic education subsidies.
Due to the budget impasse the normal funding stream is not available. The charters say that the law stipulates that since those funds are not available, the funds are then deducted from other state payments. The state is expected to make a $45 million payout to charter schools on Oct. 22, with 312 school districts diverting funds to charter schools.
“All of our schools, including traditional public schools and charters, need to be appropriately funded by the commonwealth,” Senate Democratic Appropriations Chair Vincent J. Hughes (D-Philadelphia/Montgomery) said. “However, we cannot provide special assistance to charter schools while many other school districts are suffering.
“I urge the state treasurer to hold off making payments to charter schools until the budget impasse has been resolved and all schools have funding in place.”
Sen. Jim Brewster (D-Allegheny/Westmoreland) called for the suspension of the payment to charter schools late last week. Brewster said “public schools are facing incredible difficulties because of the lack of a state budget.
“Now, the funding they are getting outside of the basic subsidy is being hijacked and that is wrong.”
Brewster pointed to the situation involving two of his school districts in the Monongahela Valley as examples of inequity. He said that while McKeesport is due $1.2 million in reimbursements, they will only receive $41,000 after charter school funds are deducted. He said that Clairton will have to send its entire $230,000 reimbursement to charters and receive nothing.
“Since so many of our schools are hurting due to the budget impasse, we need to answer important legal questions regarding these funds before they are distributed later,” Sen. Andy Dinniman (D-Chester), Democratic chair of the Senate Education Committee, said. “The bottom line is that both public and charter schools are in need of these supplemental gaming funds – funds that do not go through the normal budget process.”
In the letter to the treasurer, Senate Democrats said they do not believe that gaming fund reimbursements constitute “state payments” and that the state law dealing with disbursement of funds never contemplated a budget impasse.
They say that the statute involving the generation of faming funds and property tax relief define the use of funds disbursed from the property tax relief fund. Senate Democrats say that there is no discretion to shift funds earmarked for tax relief to pay operational costs at charter schools.
“Pennsylvania Race Horse Development and Gaming Act and the Taxpayer Relief Act must be read together in order to establish the General Assembly’s intent for the use of the money in the Property Tax Relief Fund,” the letter says.
Costa said that under the Fiscal Code the state treasurer has the authority to withhold payments from the state treasury.
“No payment can be made without the state treasurer’s warrant and approval,” Costa said. “This is a clear case when the law is murky and public schools are being treated inequitably by laws that did not anticipate a long budget impasse.”
Brewster, who met with the secretary of education and budget secretary yesterday about the issue, said he is very concerned about the short-term financial health of school districts if the funds are diverted.
“Many school districts across the state will bear the burden if these funds are released and they are not compensated,” Brewster said. “Given the outstanding legal issues, the responsible course of action is to stop payment until the conflicting interpretations of the law are reconciled.”
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$1,990 rebate to taxpayers; property taxes eliminated for nearly 2/3 of property owners
Harrisburg – June 24, 2015 – A new property tax plan that would eliminate school property taxes for 2 million homeowners, reduce property taxes by $1,990 for another 1.2 million homesteads and provide a $500 rent rebate for more than 800,000 Pennsylvanians was unveiled today by Senate Democrats.
Under the PA Home Rebate plan, property taxpayers would be eligible for a 100 percent rebate of their school property tax bills up to $1,990 while renters would receive rebates of $500 provided their income is less than $50,000. The rebates would be available annually.
“The plan is simple, straightforward and substantial,” Sen. Jay Costa (D-Allegheny), the Senate Democratic leader said today. “It eliminates school property taxes for 2 million homesteads, makes deep cuts for more than a million more and helps renters.
“Seniors, working men and women and virtually all taxpayers and renters benefit from this approach.”
Costa said the plan drives out more than $4.4 billion in tax and rent relief by shifting the tax burden from a heavy reliance on the property tax to a mix of the Personal Income Tax, Sales and Use Tax and tobacco taxes.
“The plan provides significant tax and rent relief that Pennsylvanians have wanted,” Sen. Vincent J. Hughes, (D-Philadelphia) the Senate Democratic Appropriations chair said. “The $1,990 in relief is based on the average property tax bill in Pennsylvania.
“This is a fresh approach and a departure from the plans on the table because it is not based on a distribution formula and it provides uniformity in relief.”
Gov. Tom Wolf offered a property tax plan as a part of his budget address in March. The House of Representatives advanced their own plan (HB 504) which passed the House earlier this year. Each of those efforts include a complex formula to redistribute revenues.
The Independent Fiscal Office studied the Senate Democratic plan and reported its findings in March. In a letter to Costa and Hughes, the IFO indicated that the average property tax bill In Pennsylvania was $1,990 and the median was $1,608.
“This plan takes an important first step in shifting more funding responsibility for schools to the state and away from the local property taxpayer,” Sen. Lisa Boscola (D-Northampton) said. “While I still support complete elimination of school property taxes, plans like this provide relief to those struggling to pay ever-increasing property taxes.
“Many of us have sought total property tax elimination as our goal, but until that plan can get the necessary votes this is an excellent step forward.”
“For many seniors this is an exceptional approach because it would provide dramatic school property tax relief combined with relief from county or municipal taxes,” Hughes said.
Costa and Hughes said the Senate Democratic Caucus plan includes protections against sharply escalating school district taxes to further protect taxpayers from spikes in local taxes.
Because the plan provides a 100 percent rebate up to $1,990, taxpayers will be inoculated from future school district property tax increases until their tax bill reaches that threshold. In addition, current Act 1 spending caps, which require voter approval of spending above an inflation index, would remain in place. The amount that school districts could keep in reserve would be capped at four percent.
Finally, once Act 120 pension increases plateau and the school funding gap created by Gov. Tom Corbett’s drastic cuts in school funding is filled, school districts will not have to repeatedly raise local taxes to cover costs, they said.
Other elements of the plan include making the relief available as soon as possible via a Short Term Investment Program loan from the state Treasury. Taxpayers would be able to receive the rebate of up to $1,990 by check once they submit documentation that they paid their taxes. The process would be similar to the one that is used to process the rebates for senior citizens under the Property Tax Rent Rebate program, the Democrats said.
Hughes said the plan allows Philadelphia to fashion its own tax relief scheme because it uses a significantly different tax menu to fund its schools.
He said the plan allows flexibility for Philadelphia to lower a combination of taxes. The city currently uses a combination of a high wage tax, cigarette tax revenues, local sales tax and property taxes while most other school districts balance their books using local property tax revenues.
The proposed tax mix that generates the $4.4 billion to pay for the rebates uses a .78 increase in the Personal Income Tax, a 0.6 increase in the Sales and Use Tax and new levies on cigarettes and other tobacco products.
Costa and Hughes both noted that the levies in the Senate Democratic plan are similar to or lower than both the tax menu presented in HB 504 and the Governor’s proposal.
The senators said that they are open to discussing the proper mix of revenues to fund significant property tax relief for all Pennsylvanians.
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