Street Corner Soapbox: State Budget
Budget cuts, loop holes, and taxation. What's Pennsylvania's future?
In my recent story on the Erie School District budget woes, I made a claim that the means to fully fund education existed, but that Pennsylvania Governor Tom Corbett declined to appropriate the revenue for political reasons.
One of the places Corbett could have gotten revenue is from the fracking industry, which essentially operated unregulated and untaxed -- until this spring, after the Pennsylvania Assembly passed a fracking bill that allows counties to levy an "impact fee" on drilling within their borders. The bill has many problems -- including an Orwellian physician "gag rule," which prohibits healthcare providers from disclosing to their patients that an illness may be related to fracking chemicals, and a low tax rate relative to other gas-producing states -- but the worst may be the provision preventing counties that opt for the impact fee to zone where drilling takes place.
That is, the bill bribes counties to allow the fracking industry to drill wherever they want. We all know the counties will take the money because of the massive cuts made by fracking friend, Gov. Corbett, to local school budgets.
But there are other revenue sources available, too. Better Choices for Pennsylvania, a coalition advocating for smarter state budget policy, published a list of tax loopholes that, if closed, could on their own provide more than enough revenue to adequately fund education in the state.
Among the list of loopholes that could be closed, include the "Delaware loophole," a tax law that allows franchises or outlets of major retail corporations to deduct "royalty payments" to out-of-state holding companies as a business expense. But basically, the stores send the money to a post-office box in Delaware, which is then siphoned back into the parent company -- not unlike a legal money laundering operation.
Other states have closed the loophole, requiring that royalty payments must be made to actual operating companies. If Pennsylvania followed suit, it could raise as much as $500 million in taxes.
Pennsylvania could also impose a tax on smokeless tobacco and cigars -- a portion of the tobacco industry that dodged taxation several years ago. Extending the cigarette tax to chewing tobacco and cigars could raise as much as $50 million in taxes. Smokeless tobacco was spared because of political considerations, but a tax would not only raise revenue but might serve as a disincentive to Pennsylvanians to give up (or better, never start) their tobacco habit.
Better Choices for Pennsylvania lists more sources for potential revenue, none of which would impact middle-class Pennsylvanians or the state's small businesses. Most of the suggestions simply follow policies enacted successfully in other states. In short, they'd have little impact on the economy of the state.
But don't hold your breath. Based on the composition of the fracking bill, neither the governor nor the state assembly seems interested in fixing an unjust tax system that lets large corporations exploit a labyrinthine tax code, while burdening everyday Pennsylvanians and small businesses do more than their share of heavy lifting. Maybe that's because corporate donations to GOP campaigns unduly influence politicians. Or maybe it's because conservatives really believe that unburdening huge corporations from their civic responsibilities benefits local communities somehow. Or maybe because real reform involves too much work.
Whatever the reason, unless the political climate in Harrisburg changes, look for the state government to continue its policy of slashing education and other essential services.