Pennsylvania finally has a budget, just 101 days late. But unfortunately, the budget doesn’t include the broad-based income tax increase that Governor Ed Rendell had supported. And while Governor Rendell was able to convince legislators of the need for new revenue, the revenue sources that were selected leave much to be desired.
One major revenue source, for example, is a $190 million tax amnesty. Tax amnesties are shortsighted and unfair – as we explained just a few weeks back.
Other revenue is projected to come from the legalization of poker, roulette, and other table games. Given the seemingly endless delays surrounding the implementation of slot machine gambling in Pennsylvania, it’ll be interesting to see how long it takes before the first hand of poker is played. The state’s Gaming Control Board is already on the record as saying it will need at least six to nine months just to prepare to regulate these new games.
Given that significant gambling operations already exist nearby in New Jersey and West Virginia (and could soon be coming to Ohio), Pennsylvania shouldn’t be counting on its gambling expansion to produce much in the way of tourism. And if casino industry lobbyists have it their way, and the current $20 million license fee is slashed to just $10 million, the $200 million revenue estimate attached to table gaming should be expected to plummet as well. We wrote about the folly of gambling as a revenue source a few weeks back.
Pennsylvania also chose to increase its cigarette tax, lease state forests to natural gas exploration companies, impose a new tax on Medicaid managed-care organizations, and re-direct some current cigarette tax and gambling revenues into the state’s general fund.
Overall, it’s a pretty disappointing revenue package. There are a few bright spots, however. The scheduled phase-out of the business capital stock and franchise tax was delayed (now is hardly the time to be cutting taxes), the state’s film tax credit was temporarily cut back, and the rainy day fund was wisely tapped.
All in all, it’s certainly a good thing that Pennsylvania chose not to address its budget shortfall with spending cuts alone…but the deal that was reached leaves more than a little room for improvement.