Freeman proposes legislative package, methods to resolve budget impasse

HARRISBURG, Oct. 21 – At a Capitol news conference today, state Rep. Bob Freeman, D-Northampton, unveiled his legislative budget package designed to resolve the current stalemate regarding the 2015-16 state budget.

"This proposal seeks to explain the nature of the current stalemate in Harrisburg and present a commonsense, compromise plan to pass a budget, increase funding for public education, address the state's structural deficit and deliver meaningful school property tax relief," Freeman said. "I've also addressed how to attain these goals and gain legislative approval on this compromise."

Freeman's package includes enacting a stop-gap budget from July 1 through Dec. 31, 2015, and a final budget covering Jan. 1 to June 30, 2016. This compromise, he said, would give legislators and the governor time to properly negotiate a budget.

His plan would use a modest increase in the state Personal Income Tax and a 1 percent increase in the Sales and Use Tax to generate revenue to address the structural deficit, pay for enhanced property tax relief, expand the poverty exemption and restore funding for public education cut by the Corbett administration. His proposal would temporarily increase the PIT rate from 3.07 percent to 3.5 percent from Oct. 1, 2015 to March 31, and then drop it to 3.25 percent on April 1. Overall, this would generate an increase of $1.04 billion in new revenue for the current fiscal year and $720 million in new revenue in 2016-17.

"Even at the modified rate of 3.25 percent next year, the Commonwealth's Personal Income Tax is still the lowest income tax among our neighboring states and one of the lowest in the country," Freeman said.

Increasing the sales tax by one penny per dollar would produce $1.7 billion annually. The sales tax still would exempt food and clothing, but the exclusions for cable TV, gum, candy, spa treatments, tattoos, tanning and hair removal would be removed, as would the 1 percent vendor discount for collecting the state tax.

A unique feature to Freeman's plan would create a sales tax exclusion for hardcover and paperback books.

"By making books more affordable, we're sending a positive message on reading and literacy," Freeman said.

Additionally, his package would offer expanded school property tax relief for homeowners and an increased poverty exemption to provide more tax relief for seniors and low- to moderate-income working families.

"Expanded school property tax relief is a win-win for everyone," he said. "Property taxpayers would finally get some substantial property tax relief, particularly those on fixed or limited incomes."

Under his poverty exemption expansion, a family of four with an income of up to $40,000 would now be exempt from the PIT. Additionally, a portion of the increased funding would be dedicated to school property tax relief: 0.075 of the PIT and the 1 percent increase of the sales tax, totaling $2 billion for tax relief.

"The revenues raised from this package would go a long way toward addressing our budget needs and, while not eliminating the structural deficit entirely, would reduce it significantly, making a resolution of next fiscal year's budget far easier,” Freeman said.

"I believe this offers a fair and reasonable proposal to settle this year's budget and raise much-needed revenue as fairly as possible with as little impact on the average taxpayers, while delivering school property tax relief, a much-needed increase in funding for public education, and a sizeable reduction in the structural deficit that makes dealing with next year's budget considerably easier. It is a win-win proposal for Pennsylvania and should be adopted."

Freeman pulled an example from history to explain his method for obtaining passage of his package.

"The Compromise of 1850 passed by Congress to stave off the Civil War for another 10 years is illustrative of how this year's budget, funding package and school property tax issues need to be approached in the legislative process to achieve a sustainable state budget," he said.

One piece is not putting everything in one bill, but in several so that more legislators can support the ideas they like, rather than oppose the entire package because of one provision they dislike. A second piece is to offer an independently developed proposal that is not associated with any caucus leadership or the governor. A third and final piece is to focus solely on legislation related to the budget, rather than include such non-related topics as pensions, gambling or liquor.

"While these issues are important, they are not immediately at the heart of the budget crisis impacting the state budget. They are too divisive given the current polarized political lay of the land in Harrisburg,” Freeman said. “Instead of serving to help resolve the budget impasse, they are more likely to unravel any cobbled-together coalition of voting blocs in the General Assembly that are needed to address the core problem. It is far better that they be left to either separate votes in next year's session or serve as issues to be raised and debated in the course of the 2016 elections."

Freeman is a 29-year member of the House of Representatives. He is Democratic chairman of the House Local Government Committee.