Gov. Wolf’s chief of staff touts tax relief package in upcoming budget proposal

Katie McGinty, chief of staff to Gov. Tom Wolf, explains his budget proposal.

UPPER DARBY >> Gov. Tom Wolf’s chief of staff visited the Daily Times, a sister paper to The Phoenix Reporter & Item, on Friday to tout the governor’s budget proposal, calling the plan the largest tax relief package in many years.

Wolf introduced his first budget on March 3, more than three months before the end of the fiscal year on June 30, and it includes reductions in some taxes, but increases in others.

“This package as a whole proposes the biggest tax relief for both individuals and businesses in a couple of generations,” Katie McGinty said. “It is absolutely an urgent package for where Pennsylvania finds itself.”

Among the chief concerns addressed by Wolf’s plan are the unfunded pension liabilities for state employees and education funding. The governor’s proposal calls for a 5 percent gas extraction tax that would provide upwards of $2 billion for basic education funding over the next four years, including $1 billion in the 2015-2016 fiscal year.

Concerns have been raised about the falling price of natural gas and how that could impact the revenues realized by an extraction tax, but McGinty discounted those concerns, saying that the state’s gas wells are outpacing production of every other state, except for Texas, which has been using hydraulic fracturing for decades.

“We have a good combination of value and volume,” McGinty said. “The price is falling, but our production volume is up.”

Property tax relief, which McGinty said was one of the issues that taxpayers identified as a priority, will lower taxes on property, while increasing sales and income taxes. The personal income tax will increase by 1 percent, to 3.7 percent, while the sales tax will go up to 6.6 percent. Corporate net income tax will decrease to 40 percent. Renters earning less than $50,000 a year will receive a $500 tax rebate check.

“This budget takes us from the state with the second highest corporate income tax to the state with the fourth lowest,” McGinty said.

Locally, the Chester Upland School District would see a 96 percent reduction in property taxes for the median household, which would lead to a 93 percent reduction in millage rates, all from the increased spending on Basic Education subsidies.

Repairing the state employees’ underfunded pension system is a legislative priority that no one seems to want to act on, but Wolf’s budget calls for the maintenance of the system by taking out a large bond issue. McGinty said that the system has been ignored for so long, that drastic action is needed to save it. The state pension systems are currently underfunded by nearly $50 billion.

“(The legislature) has failed to provide any proposal that would solve the pension problem while reducing costs to the public,” she said. The 401(k) solution lauded by some republican legislators will bring about hundreds of millions of dollars in added costs, McGinty claimed, all of which will be paid to hedge fund managers.

Wolf proposes taking out a $3 billion bond issue to immediately improve the solvency of the pension funds for state employees and public school employees, while reforming the state liquor sale system to bring in additional revenue.

“Let’s unshackle the liquor stores by allowing them to be open for longer hours, to be open on Sundays, become more retail oriented and to be more open with direct shipping,” McGinty said. Selling off the state store system would provide a massive influx of cash, she said, but the governor’s plan to keep them open while modernizing the system would improve upon the $550 million it brings in annually.

After four years of on-time budgets under former Gov. Tom Corbett’s administration, McGinty is confident that a budget deal can be hammered out between the two houses in Harrisburg and the governor. She said that while the leadership of the two parties are jousting about policy, many of the rank and file legislators are keen on working together.

“There is plenty of room for some give and take here ... ,” McGinty said. “There is no excuse not to have a budget of integrity by the June 30 deadline.”

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