Republican lawmakers on Tuesday announced a $3 billion tax cut just announced as a counterproposal to Democratic Gov. Josh Shapiro’s budget proposal, as both sides offered competing visions for how to spend the huge cash surplus sitting in the state treasury. submitted a bill.
With less than two months until the start of the new fiscal year on July 1, the tax bill, which includes tax cuts for income taxes and electric services, passed the Republican-controlled Senate by 36 votes, as Republicans made it their top budget priority. It passed on 14.
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Republicans say it would be the largest tax cut in state history.
In the coming weeks, budget negotiations are likely to revolve around Mr. Shapiro’s proposed $3 billion in spending increases and his Republican counterpart’s $3 billion in tax cuts. Democratic leaders opposed the bill even though it had the support of eight of 22 Democrats, saying it would not pass in the Democratic-controlled House.
Republicans said the bill aims to signal their priorities after hearing the state’s surplus spending plans that Democrats have floated for weeks and months.
“What we’re saying is… if we think there’s too much money in a savings account, let’s give it back to the taxpayers who put it in the account in the first place,” Senate Majority Leader Joe Pittman told reporters on The News. ” he said. meeting.
Republicans argued that such tax cuts would improve household finances, accelerate growth and stimulate the economy in states that desperately need appeal to keep pace with faster-growing states.
Pennsylvania Governor Josh Shapiro speaks at a campaign event in Scranton, Pennsylvania, Tuesday, April 16, 2024. On Tuesday, Republican lawmakers advanced a $3 billion tax cut bill they just announced as a counterproposal to the Democratic governor. Josh Shapiros’ budget proposal offers competing visions for how to spend the huge surplus sitting in the Treasury. (AP Photo/Alex Brandon)
The Shapiro administration expects to have $14 billion in reserves by the end of June, and what to do with it is the subject of debate in Harrisburg.
In a statement, Mr. Shapiro did not say whether he supported it, but he welcomed a conversation about what to do with the country’s surplus.
“With this proposal, Senate Republican leaders come to the table and recognize that they must invest in Pennsylvania’s future,” his office said.
Democrats called for additional tax breaks for the lowest income earners (Republicans refused) but criticized the bill, which was announced just 24 hours before the vote, as lacking in transparency.
He also said there was a lack of support for public schools in light of a court ruling last year that found Pennsylvania’s public school funding system violated the constitutional rights of students in poor districts. .
Sen. Sharif Street, D-Philadelphia, said attracting businesses and new residents is about more than tax rates. People want a high quality of life, including quality public schools and safe communities, and tax cuts will not help improve Pennsylvania’s poor track record in funding schools and public safety, Street said. .
“It’s a failed strategy that won’t bring growth to Pennsylvania, it won’t bring jobs to Pennsylvania,” Street said during the floor debate.
Senate Republicans’ tax bill would restore the personal income tax rate from 3.07% to the 2.8% level it was at before lawmakers raised it in 2003 to close the deficit amid the economic downturn.
The bill would also eliminate the 4.4% gross receipts tax on profits of private power companies. The tax dates back to the 1800s and is levied on commercial and residential electricity customers.
Mr. Shapiro’s $48.3 billion budget proposal announced in February envisioned increasing spending by $3 billion, or about 7%, while underwriting Pennsylvania’s flash reserves.
Mr. Shapiro’s plan would pump billions more into underfunded public schools, public transportation, services for people with intellectual disabilities, higher education, and major industrial and high-tech projects to revitalize the slow-growing economy. is.
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To balance things out, the proposal would reduce the state’s cash reserves from $14 billion to $11 billion. Although it has the support of leading Democratic lawmakers, it has not yet been voted on in either chamber.
Republicans argue that Mr. Shapiro’s spending plan will cause the state to run out of surplus within a few years and have to raise taxes, given the slowing growth in state tax collections.
The surplus began accumulating during the coronavirus pandemic. At the time, billions of dollars in federal aid covered some of the bills that states would normally pay, and rising inflation increased tax collections on income and sales.
