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Hits and Misses from the 2015-16 Legislative Session
That's a wrap.
The 2015-16 legislative session is officially in the history books. Despite a $650 million tax hike, Pennsylvanians have a lot to celebrate from the past two years. From elimination of the Capital Stock and Franchise Tax to wine modernization, recent events signal Pennsylvania’s political leaders may be ready to start tackling the broken systems that are driving state spending far faster than Pennsylvania’s economy.
Here are the top seven taxpayer victories from the 2015-16 legislative session:
- Five tax hike proposals defeated in 2015. During his first year in office, Gov. Wolf proposed five different broad-based tax hike plans, including higher personal income, sales, and tobacco taxes; a natural gas severance tax; and more. The first proposal would have increased a family of four's tax burden by $1,450. Ultimately, the governor allowed a no-tax-hike 2015-16 budget to become law.
- Capital Stock and Franchise Tax elimination. Originally set to expire in 2011, this business tax, combined with the 2nd-highest corporate net income tax rate in the nation, discouraged job creation and contributed to PA’s poorly ranked business climate.
- No broad based tax hikes in 2016. The legislature refused to entertain sales or income tax increases. Unfortunately, lawmakers implemented $650 million in narrow-based tax hikes.
- Increased labor union accountability. Until last year, union leaders and members could legally stalk, harass, and threaten to use weapons of mass destruction when involved in a “labor dispute.” Act 59 of 2015 closed this loophole. In early 2016, Act 15 of 2016 gave taxpayers the ability to see the costs of government union contracts before they go into effect.
- Funding students, not systems. The 2016-17 budget increased the Educational Improvement Tax Credit by $25 million, giving more students the opportunity to escape violent and failing schools. The budget also includes a student-based funding formula, directing any funds above 2014-15 levels to schools based on current enrollment.
- Liquor modernization. In a small step forward, restaurants and grocery stores can now sell wine, and beer distributors gained additional freedoms, like the ability to sell six-packs.
- Honorary mention: Uber and Lyft legalization. Despite a contentious relationship with the Public Utility Commission, lawmakers finally made the ridesharing services Uber and Lyft permanently legal in Philadelphia and across the commonwealth.
The last two years also saw some missed opportunities:
- An unbalanced 2016-17 budget. Lawmakers passed—and Gov. Wolf let become law—a spending bill without revenue to pay for it. Despite $650 million in tax hikes, spending will still exceed revenue projections, according to the Independent Fiscal Office.
- Pension reform. In June 2015, lawmakers passed landmark legislation to place new state employees and public schoolteachers in a defined-contribution retirement plan, similar to a 401(k). Gov. Wolf vetoed the legislation.
- Liquor privatization. Both chambers passed complete liquor privatization, which Gov. Wolf promptly vetoed.
- Paycheck protection. In October of 2015, the state Senate passed SB 501 to ban the use of public resources to collect political union dues and campaign contributions. The legislation stalled in the House.
- Medicaid expansion. Despite opposition from the legislature in 2014, Gov. Wolf rewrote a federal waiver to expand Medicaid under the Affordable Care Act with little opposition in 2015. At the time, officials predicted about 500,000 new enrollees and an infusion of federal cash that would stimulate the economy. To date, rolls have grown by more than 670,000, while the commonwealth spent $500 million last year and $240 million this fiscal year.
- Seniority reform. Gov. Wolf vetoed legislation to protect great teachers by ensuring that during furloughs, teachers are retained based on effectiveness, not simply seniority.
- Corporate welfare reductions. Pennsylvania spends more than $800 million per year on myriad tax credits, grants, and special loans to private corporations. Yet, we continually rank near the bottom in economic growth. While a few bills to reduce these loans made progress, the legislature has, by and large, failed to recognize these programs don't work.
The commonwealth's financial troubles are serious and systematic. In the new year, lawmakers will have another chance to tackle the broken systems that harm Pennsylvanians by pursuing true pension reform, welfare reform and expanded educational choice for families.