Harrisburg — Governor Tom Wolf today (February 3) unveiled his proposed $40.2 billion General Fund Budget for Fiscal Year 2021-22, which includes a massive increase in state spending, a substantial personal income tax rate hike, and elimination of funding for broadband expansion as well as vital agricultural and health programs and services, according to Senator Mario Scavello (R-40), who opposes the plan.
The proposed FY 2021-22 Budget includes a $3.1 billion (8.2 percent) increase in state spending from the current fiscal year.
The governor wants to increase the state personal income tax (PIT) rate from 3.07 percent to 4.49 percent (a 46.3 percent hike) as of July 1 to raise $3 billion annually. About one-third of all Pennsylvanians, would see their state tax burden increase under the governor’s proposed PIT rate hike.
“After all of the closures and restrictions which have devastated small businesses across the Commonwealth and put a record number of residents out of work, the governor wishes to deal a fatal blow in the form of a staggering 46 percent increase in the personal income tax,” Scavello said.
Upwards of one million PA small businesses will have their tax rates increased by 46.3 percent under the governor’s proposal, since these pass-through businesses (i.e. S corporations, partnerships, etc.) pay business taxes at the PIT rate.
This proposed PIT rate increase coupled with the governor’s ongoing COVID-19 restrictions and his proposed minimum wage hike would be devastating for many family operations that are already struggling to stay financially solvent.
“This proposal is an economy killer. It will wreak havoc on working families who are already burdened with current taxes, unemployed residents and businesses,” said Scavello. “We need to commit to moving forward with a budget that is fiscally responsible that spurs economic growth, helps ease the tax burden on Pennsylvania residents, protects jobs and creates new jobs.”
He is also proposing a $168 million plan to augment funding to the State Police by charging all municipalities for police services regardless of municipal coverage.
While Governor Wolf is calling for a major spending increase in several budgetary line items, he is also planning to eliminate $5 million in state funding for broadband expansion, even though the funding is mandated by Act 132 of 2020 (Senate Bill 835), as well as millions of dollars for agricultural programs and health care services.
Scavello said he is frustrated that the proposal to increase the personal income tax will hamper his long-fought battle to eliminate school property taxes.
“With the PIT increase being proposed, it is clear that the governor is not looking to provide school property tax relief in the future,” Scavello said. “The same people he is looking to help, low-income and low-income seniors that are in their homes and can’t afford the burdensome school property taxes, would be hurt by this proposal.”
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