PA Senate Passes Tax Increase on Utility Bills to Balance Budget
HARRISBURG -– As part of a plan to close the $2 billion budget gap, the Pennsylvania Senate has voted 26-24 in favor of borrowing money and instituting some tax increases.
According to the Commonwealth Foundation’s press release, under the Senate’s $2.2 billion revenue plan, Pennsylvanians would pay a higher tax on cell phone service, home-heating bills, electricity, and some online purchases made through vendors such as Amazon and eBay.
The Senate’s $571.5 billion tax hike would cost a family of four nearly $180 dollars in higher taxes (details below).
A new natural gas gross receipts tax makes up the majority of the increase. About half of Pennsylvania households will pay this tax on their home heating bills. Additionally, the Senate added a natural gas severance tax on top of the impact tax drillers already pay.
NATURAL GAS PRODUCTION
The state would raise an estimated $100 million a year by imposing a new tax on natural gas production in the Marcellus Shale, the nation’s largest natural gas field. The effective tax rate for 2017-18 would be 2 cents per thousand cubic feet, although the annual tax rate may range from 1.5 cents to 3.5 cents. That would raise significantly less money than what Wolf had originally sought. In February, he proposed a 6.5 percent tax on the value of the production. In 2015, he had proposed a 5 percent production tax, plus 4.7 cents per thousand cubic feet. Money from the new severance tax would ensure that proceeds from an existing impact fee imposed on Marcellus Shale wells do not fall below $200 million a year.
The Senate plan would borrow $1.3 billion against future revenues that Pennsylvania will receive from its share of a landmark 1998 multistate settlement with tobacco companies. With interest and borrowing costs, that could mean Pennsylvania will repay $2 billion over 20 years. The scale of such long-term borrowing to prop up Pennsylvania’s general operations is unheard of in the state, say current and former state officials.
NATURAL GAS SERVICE
Consumers would face a new 5.7 percent tax on natural gas utility bills, or $5.70 on a bill of $100, to raise an estimated $300 million annually. Natural gas is Pennsylvania’s most prevalent home-heating fuel, used in more than half of the state’s roughly 5 million households. The tax would presumably be a growing revenue source as the number of households heated with gas rises.
A tax on home electric bills would rise to 6.5 percent from 5.9 percent currently.
A tax on home and cellular telephone bills would rise to 6 percent from 5 percent currently.
Pennsylvania’s 6 percent sales tax would extend to third-party sales in online marketplaces.
The Senate’s revenue plan counts on $200 million from an expansion of casino gambling in Pennsylvania, already the nation’s No.2 casino state.
Senate Republicans have had differences with Wolf and House Republican leaders. A proposal brokered by Senate Republicans would hinge on Pennsylvania’s casinos being able to bid on a satellite casino license allowing up to 700 slot machines and 100 table games at a new facility, and paying licensing fees to operate casino-style gambling on websites and mobile applications. Many details remain under wraps.
The budget package would require the Wolf administration to seek federal approval to cut Medicaid costs and certain benefits, and create employment or job search requirements for working age, able-bodied adults.
The state would take $200 million from the nonprofit Pennsylvania Professional Liability Joint Underwriting Association, an organization created by state law in 2002 to offer medical malpractice insurance. The association sued in federal court to block the state from borrowing that amount in the recently ended fiscal year.
Source: Senate Republicans
The following is some of the reaction to the passage on Twitter: