Faced with a $3.2 billion budget deficit, Governor Ed Rendell is now calling for increasing the personal income tax from the current 3.07% to 3.57% for three years.
When Governor Rendell unveiled his budget in February, he proposed increased cigarette taxes, plus new levies on cigars and smokeless tobacco and also on gas drawn from the Marcellus shale formation, but not a broad-based tax hike.
Now the governor says there can be no balanced budget without increased revenues. He says boosting the income tax by a half percent would generate another $1.5 billion annually, and he wants to delay the phase out of the Capital Stock and Franchise tax.
Rendell says extreme budget cuts would damage the state’s education and economic development and job training programs…."we shouldn't balance the budget by eliminating more job opportunities or by shortchanging our children's future with drastic cuts to public education." The governor says if the state sharply curtails education funding then school districts would be forced to raise property taxes.
The income tax hike would mean a person making 50 thousand dollars a year would pay an additional 5 dollars a week. Rendell said that 4 out of 10 households would not be affected by the tax hike because they are senior citizens or make below the $32,000 minimum to pay the income tax. The governor says there are no good choices and the fairest plan is to spread the pain across the board.