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Rendell's Teachable Moment?


It was hard to miss, for sure.  Not far into Governor Ed Rendell’s final budget address of his career, he proposed to lower the state sales tax by one-third, from 6% to 4%, while at the same time expanding the list of taxable items by 74.  If you were casually watching the address while reading a magazine, you might have even asked yourself “Hey, am I crazy, or did this magazine just get 4% more expensive?”

Before we go farther, let’s be clear: we are in no way questioning the motives of the governor as he makes this historic proposal.  Rendell wants any excess revenue generated by this expansion (some peg it at a $900 million per year, or perhaps more) be used to help solve the upcoming public pension crisis.  Laudable goal, for sure, since up to this point, very few folks have proposed any real solutions to the aforementioned pension crisis.  Oh, many have wailed about defined benefit versus defined contribution plans, but Rendell is the first to move all of his chips into the middle.

But is Rendell also setting up this sales tax expansion debate to be a teachable moment for his other priorities, like eliminating what he feels is the corrosive effect of lobbying and special interest money in politics?

Some may recall that after last year’s budget slid across home plate 101 days after the umpire left town, Rendell was rather quick to point the finger of blame at “special interests” and lobbyists, who he said stopped some of his priorities (like taxing natural gas extraction) from coming to fruition.

Fast forward to last Tuesday, and Rendell’s new sales tax plan.  Let us be mindful that each one of the 74 items that is currently not subject to the state sales tax has an “interest group” behind it, an interest group that is likely bound and determined to keep it that way.  Some are big industries who have lobbyists (like legal services, amusement parks, and even helicopter salespeople) and some are just interest groups in the sense that they have an interest in not paying sales tax on what they use.  Like say, for instance, people who chew gum or use personal hygiene products.

One lawmaker, State Senator Lisa Boscola, has already pledged to be against Rendell’s plan if the “special interests” peel off some exemptions.  And some may remember the spectacular failure of state Rep. Sam Rohrer’s plan to expand the sales tax to eliminate property taxes. During that House Floor debate, when lawmakers realized they were, in fact, voting to tax things like American flags and burial vaults, the votes disappeared. 

One can very clearly see the possible, and perhaps likely, outcome of this sales tax expansion debate.  The plan fails, and Governor Rendell then blames lobbyists and special interests for killing it.  He uses the whole episode as a teachable moment on why we need campaign finance reform, lobbying reform, and all other sorts of reform.

It is also possible the governor knows deep down he may need new revenue, but also knows that battle will be another long, protracted, election-year-fueled fight.  In this scenario, the sales tax expansion is on the table until he needs to trade it away for something really near and dear to his heart, like basic education funding.

Either way, class starts next week.


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