Wolf Budget Breaks New Ground

Former U.S. Supreme Court Justice Oliver Wendell Holmes once famously observed, "Taxes are the price we pay for a civilized society."

Pennsylvania Governor Tom Wolf’s new budget with its imposing array of new taxes promises to determine exactly how much Pennsylvanians are willing to pay for a civilized society.

The Wolf budget contains the most ambitious and bold set of proposals in modern history, including $4 billion in income and sales tax hikes, along with a new severance tax on natural gas extraction. As a lure to win popular support, he’s pledged to use some of the new revenues for education spending, property tax relief and business tax cuts popular with many Republicans.

Already a formidable cohort of both advocates and opponents of Wolf’s proposals are forming lines, girding for a battle that many expect to stretch far into the summer and beyond. Republicans have laid down their markers—pension reform together with liquor privatization are their sine quo non for any discussion of new revenues. Inevitably, this will be a blistering partisan battle with Republicans generally opposing tax increases, and Democrats open to spending proposals especially these aimed at education.

But to read the coming struggle over Wolf’s first budget as merely banal partisan wrangling misses much that is important here: at another, deeper level the struggle will be a generational one fought over whose vision for Pennsylvania prevails as the new century stretches toward its third decade. The old industrial Pennsylvania is more and more a fading memory, while the new postmodern Pennsylvania remains an inchoate mix of problems, possibilities and hopes.

The fight to come will be over whose vision of that future survives and thrives.

A brief digression upon budgets is needed. At their core, government budgets are incremental, changing slowly from year to year, decade to decade. Last year’s budget is this year’s budget, plus or minus a digit or two. Budgets are normally evolutionary, not revolutionary. When they change at all it is glacially slow, plodding and tentative.

But not this time. Counting $2.1 billion earmarked for property relief and another $1.7 billion earmarked for public school pensions, Wolf is calling for a stunning 16 percent overall increase in spending.

Will it happen?

On one hand, the state is in a truly perilous fiscal condition, facing massive pension shortfalls, compounded by a persistent "structural" budget deficit that won’t go away with better times or reduced discretionary spending. Moreover, the problems are real and Wolf’s solutions provide something for Republicans and Democrats, as well as for labor and business.

On the other hand, Wolf’s proposals face overwhelmingly opposition in both Houses of the GOP dominated General Assembly. He is proposing nothing short of a major restructuring of the tax system, shifting education spending away from the regressive property tax while increasingly relying on broad-based state taxes such as sales and income to finance state government.

But Wolf does have some history on his side. When tax hikes have happened in Pennsylvania, especially hikes in the personal income tax, it has generally followed gubernatorial elections with the state facing large deficits.

Gov. Milton Shapp in the 1970’s is the prototype. After his victory in 1970, Shapp got a Democratic controlled legislature to adopt the state’s first permanent income tax, with the state facing the largest deficit in its history. It took him two tries and a Supreme Court decision, but he got it done in 1971.

Similar experiences-tax increases early in a term, amid ongoing fiscal stress-occurred in the 1983 (Thornburgh), 1991 (Casey) and 2003 (Rendell).

So, Wolf has a chance for change. But in asking for much he may have to settle for less. Indeed, pulled apart the budget could collapse like a house of cards. Wolf may be aiming for the stars in hope of reaching the moon, as one commentator has observed. But if aiming higher to hit lower is his goal, Wolf’s budget proposes a journey rather than a destination, going forward rather than going backward, getting started rather than standing still.

Achieving any of it will require an abundant supply of a commodity chronically short in Harrisburg – political leadership. Given the scope and impact of Wolf’s proposals, he must convince the voters that his vision and goals are worthy of support. He must wage a battle for the hearts and minds of ordinary Pennsylvanians.

And that may be the easy part. He also must sell his proposals to the deeply polarized legislature now solidly controlled by the opposition party.

By any measure, Wolf, in the weeks and months ahead, faces a challenge that may exceed that confronted by any of his predecessors in modern times. Last November, many Pennsylvanians voted for their new governor because he wasn’t the old governor – and consequently know little about who that new governor is.

That’s about to change.

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