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Freindly Fire


Tax Plan Makes Governor 'Lone Wolf'

by Chris Freind
 

Who's afraid of the big, bad (Tom) Wolf?

Not the Republican Legislature.

Pennsylvania's new governor submitted a budget proposal that would raise taxes by a whopping $4.5 billion. That plan was promptly bitten in half by the GOP, with both sides now light years apart. And since the June 30 deadline has passed with no resolution, the Keystone State finds itself in a drawn-out budget stalemate.

Good.

What the governor does not yet understand is that he has little public support for his plans, making him a lone Wolf on the impasse. And so long as the Republicans don't cave, they will win the day, and by extension, so will the people.

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Let's review the major sticking points:

1.) Taxes: Raising taxes is never the answer. Doing so takes money from productive citizens and businesses – who would spend it as they saw fit in the economy, generating more jobs and, ultimately, more tax revenue – and throws it into the never-ending black hole of government spending. It's bad enough that our taxes are so high – Pennsylvania already has the nation's 10th-biggest tax burden and will soon have America's highest fuel taxes – but to make the sin mortal, whatever money raised would be completely squandered, especially on education. High taxes can never be justified, but the pill might not be so bitter if at least the money was wisely spent. But we all know otherwise.

Wolf wants to raise the income tax, sales tax (and greatly expand the list of items covered by the that tax), and tobacco tax, and single out the natural gas companies for its own tax.

America's 35 percent corporate tax rate is the highest in the world. Add in state and local taxes, and the burden becomes onerous. So in Pennsylvania, a company pays the highest federal corporate tax on the planet, on top of the nation's second-highest state corporate net income tax (9.9 percent), on top of local taxes. (Philadelphia, which is always crying poor and which the rest of the state is always bailing out, is, cumulatively, the highest-taxed city in America).

Rather than lowering the sky-high rates that stifle innovation, cause job cuts, place a cap on new hires, and take capital from the free market, Wolf wants to expand such draconian policies. Instead of understanding why companies flee (and along with them Pennsylvania's best and brightest), and figuring out what can be done to halt the exodus, the governor instead advocates penalizing the people and companies even more.

As an incredibly successful businessman, Wolf should understand the adage, "If you want less of something, tax it." But he doesn't.

2.) Property Tax Red Herring: This is the biggest joke of all. Wolf's tax hikes would allegedly provide some measure of property tax "relief." The only problem is that it won't work.

Even if taxpayers received a $1,000 rebate on their property taxes, how long do you think it will take counties and local school boards to raise property taxes after that? Try about five minutes. So Pennsylvanians would receive a small amount of temporary relief, yet be stuck with forever-higher sales and income taxes, all while watching their local property taxes continue to rise to fund a public school system that is failing our children.

Great plan, governor.

3.) Education Black Hole: How many times does the obvious have to be stated, namely that throwing good money after bad isn't just stupid, but ineffective.

Unless the teachers' unions are reined in once and for all so that accountability can finally be instilled, thereby paving the way for reforms and competition, no amount of money will change a single thing. And this isn't just a Philadelphia problem, but a statewide one.

There is no education funding "emergency." The only crisis is the lack of educational achievement for the only ones who matter: our children.

The numbers tell the story:

School spending is over $25 billion annually, averaging nearly $15,000 per student (more than 39 other states), an amount that has doubled since 1996. Additionally, school district reserves grew by $445 million in 2013 to nearly $4 billion.

All this while the number of students has declined.

Despite a drop of 35,510 students since 2000, the public school system has added 35,821 employees in the same period. Therefore, by definition, increased funding, more personnel and decreased class size have not improved student achievement.

From SAT scores to literacy, Pennsylvania students rank near the bottom. Scores on standardized exams have not improved, and nearly one-third of all 11th-graders are not proficient in reading, while 40 percent do not achieve math proficiency on the dumbed-down PSSA tests. Yet, teacher salaries and benefits rank among the highest, and Pennsylvania leads the nation in school strikes every year.

So instead of fighting over more funding, which will produce squat, the governor and Legislature should focus on reforming the antiquated tenure and seniority rules and eliminating forced union dues that are used to wage multimillion dollar political campaigns to keep the status quo intact.

Then, and only then, will things start to improve.

4.) Gov. Wolf vetoed bills that would have privatized Pennsylvania's liquor stores and reformed the state's exploding pension system. Both would have produced immense savings (negating the "need" to raise taxes), and, significantly, both had widespread public support. But taking a lesson from his incompetent predecessor (the other Tom), Wolf kicked the can down the road to our children. What a legacy after just six months on the job.

5.) Taxing natural gas drillers: Once again, we're told the energy industry needs to pay its "fair share," an example of never letting facts stand in the way of fanciful political rhetoric.

First, taxing a particular industry is flat-out wrong. Second, that proposal implies the gas industry isn't already being taxed. So the $600 million from the impact fee and over $2 billion in corporate taxes it has paid is make-believe? Imposing a job-killing severance tax on the grounds that other states are doing it is simply asinine. It would result in a production decline (thereby decreasing revenue) as the industry finds greener pastures elsewhere. And like all business taxes, it would be passed onto consumers.

Instead of penalizing the industry that has the best chance to revive Pennsylvania, Wolf should be embracing it. It has invested billions in capital projects, paid royalties to thousands of landowners, and created countless ancillary businesses, all of which produce jobs and fill government coffers.

If the GOP doesn't stand its ground here, the goose that laid the golden egg will fly away.

Tom Wolf's company makes cabinets efficiently and profitably, which is why it's so disappointing to see the governor kowtow to special interests, forgetting all the lessons he learned in business.

If he had produced inferior cabinets, failed to hold his employees accountable, and lost money, CEO Wolf would have either gone out of business or changed things. That's common sense. So why, as CEO of what should be a powerhouse state, has Wolf jettisoned those innovative ideas in favor of 20th-century "solutions" to 21st-century problems?

Tom Wolf has shown himself to be a sheep in wolf's clothing. If he doesn't start playing his cards right, he will soon be joining Tom Corbett in the one place he doesn't want to be: the "One-Term Tom Club."

Chris Freind is an independent columnist and commentator. His column appears every Wednesday. He can be reached at CF@FFZMedia.com.


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