Politics Of Stagnation

February 11, 2018 GMT

Due largely to legislative intransigence, Gov. Tom Wolf’s brief budget address Tuesday to the General Assembly dealt mostly with unfinished business. Wolf again proposed a long-overdue tax on natural gas extraction, this time projecting $250 million in state revenue from a variable percentage tax pegged to the price of natural gas. But that is just one of the issues on which the Legislature has refused to act, stalling the commonwealth in neutral, at best, rather than driving it forward. Pennsylvania’s government continues to generate significant deficits while declining to enact reforms to preclude them, short-changing workers in the process. • Pennsylvania is the only state in the entire Northeast to maintain the $7.25 an hour federal minimum wage, for example. Proponents of that miserly standard claim that any increase would unduly burden employers and cost jobs, contradicting evidence from the six bordering states that all have raised the minimum wage at least once over the past two years without producing those results. Several of those states have scheduled further increases. Wolf proposed a minimum wage of $12 an hour. That 61 percent increase probably is too much to implement at once, but the Legislature clearly should start phasing in a higher minimum this year, which would spur economic activity and increase state income tax revenue. The administration also estimated that, at $12, the higher hourly wage would reduce by about $100 million a year the cost of state social services for the working poor. • Last year, an Associated Press analysis found that residents of about 950 Pennsylvania municipalities with police departments pay about $230 per person for that coverage. Another 300 or so municipalities pay for part-time police. But more than 1,200 municipalities with more than 2.5 million residents rely exclusively on state police for coverage, effectively transferring to other Pennsylvanians the cost of their police coverage. The result is that of the state police $1.3 billion budget, about $800 million comes from motorist fees and fuel tax revenue that is supposed to go to road and bridge maintenance. As he did last year, Wolf proposed a $25-per-person fee in towns that don’t provide local police coverage, to mitigate the cost of state police coverage. That is more than fair; it’s still an extraordinary bargain, nearly 10 times less than what other Pennsylvanians already pay for police coverage. And it would generate only about $63 million a year. The Legislature could further improve the state government’s financial posture and the general state economy through other long-neglected measures that the governor did not include in this year’s budget proposal. • Legislative Republicans should follow their congressional colleagues’ lead with corporate tax reform. Pennsylvania’s corporate net income tax rate is 9.9 percent, which just about everyone agrees is too high. But many of the biggest companies doing business in the commonwealth pay far less or nothing because of the “Delaware loophole” — a tax avoidance scheme that allows them to pose as subsidiaries of parent companies established for book-keeping purposes in low-tax or no-tax states such as Delaware. The Legislature should eliminate the loophole to ensure that all corporate entities doing business in Pennsylvania pay taxes here, and then reduce the rate by about a third. • Wolf did not address pension reform, so runaway state and school employee pensions continue to act as giant suction devices attached to taxpayers’ pockets. The state government will pay more than $4 billion of its $32-billion-plus budget this year simply to cover pension costs. Every school districts will have to pay an astounding amount equal to 34 percent of its payroll. True pension reform rolling back the Legislature’s own blunders in vastly increasing benefits without funding them, rather than the minor tweaks that lawmakers have enacted, itself would put the state on sound footing. As always, budgetary and political paralysis at the Capitol is due to a lack of political will rather than a lack of resources.