Pa. House advances billions in tax cuts

January 16, 2008 9:07:23 PM PST
A state House debate on lowering property taxes turned into a multibillion-dollar tax-cutting party on Wednesday, as the chamber gave preliminary approval to breaks on everything from cell phones and business profits to inheritances and pet adoptions.

None of the measures passed out of the House, because the votes were for amendments to an underlying bill that could come up for final consideration Thursday.

Unbridled from a pay-as-you-go rule that is part of the budget process, the House stampeded through one tax break after another, as members paid little heed to warnings about the enormous hole they were potentially blowing in the state budget.

"I see a lot of passion for what the state might lose in all these taxes that aren't collected," said Rep. Scott Perry, R-York, during debate on an amendment to eliminate the state inheritance tax at a cost of $420 million in the first two years. "It's not our money to begin with, it's the taxpayers' money."

The House also voted to cut the personal income tax by an expected annual cost of $1 billion, lower the corporate net income tax by hundreds of millions of dollars a year and eliminate the gross receipts tax on cell phones.

Rep. Steve Samuelson, D-Northampton, sought to delay debate for nearly two weeks so that the House could adopt a rule requiring a tax-cutting amendment to show how it would account for the reduced revenue in the budget.

"That would allow us to adopt a pay-as-you-go rule so that we're not just voting blindly on an amendment that could possibly reduce every line item in the state budget," he said. Samuelson subsequently withdrew the motion, saying he would offer the rule change as a separate measure.

Minority Leader Sam Smith, R-Jefferson, said the amount of tax cuts voted on Wednesday was "probably not realistic" but sent an important message to Democratic Gov. Ed Rendell about the mood in the House as budget negotiations approach.

"It's meaningful at least in the sense it's setting the tone for moving in that direction," Smith said afterward.

Still ahead are tougher votes on whether to increase the sales tax or personal income tax to make up the revenues that would be lost if property taxes are significantly reduced. Majority Leader Bill DeWeese, D-Greene, said amending a bill addressing those issues was on the agenda for Thursday.

Any property tax cuts would be in addition to the $1 billion a year the state expects to reap from slot-machine gambling - money earmarked for cutting school taxes.

Together with the gambling revenue, bills on the House's agenda could result in lowering taxes on homes and farms by as much as 50 percent.

But to accomplish that, lawmakers may also increase the personal income tax from 3.07 percent to 3.29 percent and boost the state's sales tax rate by half a percent. It's currently 6 percent in most of Pennsylvania but 7 percent in Philadelphia and Allegheny County.

House rules require any amendment to a bill to be considered for a full day before voting on the bill and sending it to the Senate. Wednesday's floor action involved taking up dozens of such amendments.

First to be considered was a bill sponsored by the chairman of the Finance Committee, Rep. David Levdansky, D-Allegheny, that would amend the state constitution to increase the limit on how much property taxes can be reduced.

The constitution currently permits a 50 percent reduction, but Levdansky's bill would eventually permit the tax to be eliminated. The bill advanced toward a final vote without being amended.

The second property tax bill taken up, sponsored by Appropriations Committee Chairman Dwight Evans, D-Philadelphia, would direct tax cuts of as much as $1,400 to low income working families.

In addition to reductions in taxes on cell phones, inheritances and income taxes, Evans' bill also was amended to encourage greater investment in research and development and to specifically exempt from sales taxes the construction materials that are used on farms.