BCT Editorial – 6/5/06

This page was last updated on June 8, 2006.

Right moves; Editorial; Beaver County Times; June 5, 2006.

Below is a detailed critique of the subject editorial.

“Rendell’s proposals make good use of budget surplus

“The state has collected $723 million more than it expected in taxes this year.

“And because this is a year for gubernatorial and legislative elections, all surplus talk is political.

“Given that, though, Gov. Ed Rendell seems to have come up with a fairly decent way of divvying up the surplus.”

[RWC] Other than accelerating reduction of the Capital Stock & Franchise Tax – which he previously slowed, you will note none of the “fairly decent way[s] of divvying up the surplus” involve returning the taxes we paid to us. If a vendor found he overcharged you for an item, would you be happy if he returned the overcharge to someone other than you?

“To start with, the state has $90 million less to work with because that’s how much must by law go into the ‘rainy-day’ contingency fund. This fund gives the commonwealth a cash reserve it can tap when the economy takes a downturn, thereby driving down revenue from sales and income taxes.

“The governor wants to use half of the surplus to fill in gaps in the 2005-06 budget, which runs through June 30. Included in the mix are filling authorized but unfilled state trooper slots and implementing a new contract for state prison employees. Don’t forget the state has not been immune to increased costs of oil and natural gas.

“The governor also wants to use $84 million to supplement federal funding for prescription drugs for senior citizens and for health care for poor people. (Any elected official who wants to deny senior citizens help with prescription drugs or helping poor people with their health care can feel free to speak out now.)

“Rendell proposes using another $73 million to reduce the capital stock and franchise tax. The AP reports this year’s capital-stock tax rate is 4.99 mills - less than half of what it was when it was targeted for a decade-long phase-out under the GOP administration of former Gov. Tom Ridge in 2000.

“In the 2006-07 budget he presented in February, Rendell proposed dropping the 2006 rate to 4.89 mills. His latest plan would cut the rate to 4.49 mills. If Rendell’s plan is approved, the rate would drop to 3.49 mills in 2008.

“The importance of continuing this drop in the capital-stock tax cannot be stressed enough. The overall business tax climate in Pennsylvania is not bad, but it has a couple of taxes that spook businesses. The capital-stock tax is one of them. The other is the corporate income tax rate, which now stands at 9.9 percent. That puts it among the highest in the nation.”

[RWC] “The overall business tax climate in Pennsylvania is not bad” comment is a recurring position of Times editorials. The most recent were “No excuses” and “Ohio envy” from March 1^st. Please read those critiques for my reaction.

“The governor also wants to use the surplus to double the rebates for purchases of hybrid vehicles from $500 to $1,000, and authorize weeklong ‘sales-tax holidays’ in May and December for purchases of energy-efficient appliances. School districts would get extra money to help pay for bus fuel. Also, contributions to the TAP 529 college-saving program would be exempted from the state’s personal income tax, a move that would affect 50,000 families.

“Election year or not, Rendell’s proposals make good use of the surplus.”

[RWC] Here’s what to take from this editorial. With minor exceptions, “good use of the surplus” translates to “the government can spend your money better than you.”