Patrick M. Gleason

Lame Duck Governor Ed Rendell Not Going Gently Into That Good Night - New Call for Higher Taxes


Posted by Patrick M. Gleason on Friday, August 27th, 2010, 8:59 AM PERMALINK

Pennsylvania lawmakers will be back in Harrisburg in mid-September to revisit the severance tax, which lawmakers agreed to pass as part of the budget deal that was struck nearly two months ago. But before legislators could even book their travel back to the capitol, Gov. Ed Rendell is digging into his “best of” folder of tax hike proposals and dusting off an oldie from 2007 – an oil company profits tax (OCPT).

As a result of the federal government’s repeated rejection of the plan to toll the Pennsylvania Turnpike, the state is facing a transportation funding shortfall in excess of $400 million annually. To rectify this, Rendell this week called for an 8% tax on oil company profits, which his administration estimates would generate nearly $600 million per year. When Rendell first offered this in early 2007 he sought a 6.17% tax on oil company profits to fund inefficient and corrupt mass transit systems in the Commonwealth. The Pennsylvania General Assembly rightly rejected this misguided and unprecedented new tax then and should once again.

While an OCPT would naturally lead to higher prices at the pump for Pennsylvanians, Rendell claims the new tax would be structured in such a way as to prevent pass through of the heightened costs to consumers. A couple problems with this:

1) It’s illegal. Such a pass-through prohibition provision would almost certainly be found by the courts to be in violation of the Interstate Commerce Clause, which prevents states from imposing taxes which discriminate against interstate commerce, which is what a state OCPT in conjunction with an anti-pass-through provision would yield in the form of higher gas prices outside of Pennsylvania and increased costs for distributors, natural gas producers, and other employers operating in other states.

2) An OCPT would lead to higher heating oil prices just in time for winter. Rendell loves to deride “Big Oil” but the fact is that an OCPT would hit small, mom and pop oil and gas companies throughout the Commonwealth that produce heating oil for Pennsylvania households. Pennsylvania Transportation Secretary Allen Biehler confirmed this when the OCPT was first proposed in 2007.

3) Rendell characterizes oil company profits in astronomical terms and paints pictures of oil company execs swimming around in Scrooge McDuckian pools of money. However, when one looks at the numbers, it becomes clear that oil company profits are par for the course compared to other manufacturing industries in the U.S. In fact, American oil company profit margins, which average at 7.3 cents on every dollar of sales, are smaller than that of all U.S. manufacturing, which yields average profits of 7.8 cents on the dollar. A number of other industries, such as apparel and electrical equipment, have greater profit margins than oil and natural gas, yet Rendell does not bully and go after them with discriminatory taxes.

4) Rendell’s rhetoric about “Big Oil” makes clear that he doesn’t know what he’s talking about when it comes to who owns oil and natural gas companies. In fact, less than 2% of oil and natural gas industry shares are owned by corporate management. The remainder is owned by tens of millions of ordinary, yes middle class, Americans through their retirement investments in 401Ks, IRAs, pensions, and other investment vehicles. Speaking of pensions; 27% of oil company stocks are owned by pension funds. Given Pennsylvania’s pension crisis, Rendell would be well-advised to avoid any tax, such as an OCPT, that would be detrimental to public pension investments.

5) Oil company profit taxes don’t work. We’ve seen this movie before. The result of the “windfall” profit tax on oil companies that Jimmy Carter signed into law in 1980 was a 3% to 6% reduction in domestic production, according to the Congressional Research Service, necessitating an increase in imported energy supplies. Furthermore, that foolish tax fell well short of revenue projections, yielding only 25% of what was forecast.

These are just a few of the reasons why an oil company profits tax would be horrible policy and have adverse consequences for Pennsylvanians and the economy. This is why no state has ever implemented such an ill-advised and illegal tax. As such, Americans for Tax Reform will be urging Pennsylvania lawmakers to reject this proposal, as they have with so many of the other policies offered by Gov. Rendell’s economically illiterate administration during the past eight years.

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Why is Dan Onorato Knowingly Misleading Pennsylvania Voters?


Posted by Patrick M. Gleason on Thursday, August 26th, 2010, 3:33 PM PERMALINK

Today Americans for Tax Reform issued the following statement to all Pennsylvania press in response to the mistruths being spread by Democratic gubernatorial candidate Dan Onorato and his campaign:

Why is Dan Onorato Knowingly Misleading Penn. Voters?

Claims that Corbett has “flip-flopped” on his no-new-tax pledge are false; ATR calls on Onorato to retract

Washington, D.C. – Democratic gubernatorial candidate Dan Onorato has been traveling around the Keystone State all week claiming that his Republican opponent, Attorney General Tom Corbett, has violated his no-new-tax Pledge by refusing to rule out raising user fee increases to address the state’s transportation needs. Americans for Tax Reform, the non-partisan taxpayer advocacy organization that sponsors the Taxpayer Protection Pledge, responded today that Onorato’s claims are patently false and called upon the Democratic nominee to retract his incorrect statements.

Tom Corbett signed the Taxpayer Protection Pledge back in February and, in doing so, has committed to Pennsylvania residents that if elected, he will “oppose and veto any and all efforts to raise taxes.” Americans for Tax Reform asks all candidates every election cycle to sign the Taxpayer Protection Pledge.

“Dan Onorato has been knowingly misleading Keystone State voters all week.  The fact remains that Tom Corbett has said nothing that would contradict or go against his commitment to prevent taxes from being raised on overly-burdened Pennsylvania taxpayers,” said Grover Norquist,  president of Americans for Tax Reform. “Pennsylvania voters need to ask themselves if someone whose honesty is already called into question by repeatedly stating bald-faced lies is the type of person they want in the governor’s mansion. 

29 sitting members of the Pennsylvania General Assembly have signed the Taxpayer Protection Pledge. At the federal level, 34 U.S. Senators and 174 members of the House of Representatives have signed the Pledge. To date, Dan Onorato has refused to make this important commitment to Pennsylvania taxpayers.

“Taxes are the last thing one would think Dan Onorato would want to challenge Tom Corbett on. Looking at his record, it is clear that Dan Onorato has yet to meet a tax increase that he doesn’t like. This is the guy that presided over and championed the Allegheny County drink tax and rental car tax, the largest tax increase in county history, which he imposed at the onset of the recession no less. The rest of his resume entails a long list of votes or proposals to raise taxes,”added Norquist. “After years of unsustainable spending and perennial efforts to raise taxes during the Rendell Administration, Pennsylvania voters are looking for candidates who are going to stop the bleeding and offer pro-growth policies to bring the state out of the recession by making the state’s tax climate less hostile to employers, families, and individuals. I applaud Tom Corbett for signing the Taxpayer Protection Pledge and encourage all candidates for elected office to make this same commitment to Pennsylvania taxpayers.

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Help Sack the Bag Ban


Posted by Patrick M. Gleason on Friday, August 20th, 2010, 11:24 AM PERMALINK

California, the world’s 8th largest economy, is on the cusp of taking the unprecedented act of banning plastic bags statewide. Legislation that would impose this misguided ban, AB 1998 has already passed the Assembly and will be up for a final vote in the California Senate any day now. If this legislation passes the Senate, it will be signed into law.Plastic bag bans have proven that they do not reduce litter or improve the environment. Furthermore, a statewide ban on plastic bags will kill manufacturing jobs in a state where unemployment is at a jaw-dropping 12% and does nothing to address the Golden State’s real challenges, namely the state’s structural overspending problem which has reached $20 billion.

Make your voice heard today and sign the petition to oppose the job-killing, ineffective California bag ban.

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Texas Voters Have Two Clear Choices This November


Posted by Patrick M. Gleason on Wednesday, August 18th, 2010, 4:10 PM PERMALINK

In a year when economic issues are rightly dominating campaign trail discussion, there are two important truths that Texas voters can now discern. In this November’s gubernatorial election, Lone Star State voters can rest assured that if they pull the lever for Governor Rick Perry, their taxes will not go up at any point in the next four years. Standing in stark contrast, Perry’s Democrat opponent Bill White has assured Texas voters that higher taxes would be a certainty under a White administration.

In an interview yesterday with the Associated Press, Bill White refused to say that he would not raise taxes if elected governor. When asked specifically about a gas tax increase, White, in dodging an easy question, responded that he would "work with the legislative leadership to address a long-run transportation plan." This is campaign speak for – “I don’t want to answer that question because voters won’t like the answer.”

Here, Perry once again stands in stark contrast to White’s ambiguity with his straightforwardness. Not only has Perry made it absolutely clear on numerous occasions that he will not consider any tax increases, he has gone so far as to put it in writing by signing the Taxpayer Protection Pledge.

Texas is projected to have anywhere from an $11 billion - $18 billion deficit to deal with when the legislature comes back into session next year. There will no doubt be many lawmakers who will want to take the easy route by simply raising taxes, making it all the more important to have a governor who does not waffle and has made clear that any shortfall will be closed without higher taxes on hardworking Texas families and employers. Rick Perry is the only one who has made clear he will do such.

Perry is also proposing bold, fiscally responsible reforms on the spending side to ensure that the state lives within its means and continues to prosper by calling for a 2/3rds vote requirement to raise taxes and a cap that limits all state spending to the growth of population and inflation. These reforms will ensure that some politician who is open to job-killing taxes increases (like Bill White) does not come along years down the road and undo all that the Perry Administration has done to make Texas America’s economic powerhouse.

It’s because of Perry’s adherence to limited government principles and fiscal responsibility that Texas is home to more Fortune 500 companies than any other state, is considered the best state to do business, and that the Lone Star State emerged from the recession well ahead of all other states.

To stay up to speed on Bill White’s openness to higher taxes and inability to answer simple questions, visit http://billwhitefortaxes.com/

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California Democrats' Online Sales Tax a Guaranteed Job Killer


Posted by Patrick M. Gleason on Thursday, August 5th, 2010, 6:20 PM PERMALINK

Earlier this week we explained why California Democrats’ new budget plan is based on faulty assumptions and that the result will be a substantial net tax increase. Yesterday The Sacramento Bee’s Kevin Yamamura pointed out another problem with Senate President Steinberg and Speaker Perez’s fuzzy math:

Democrats have built their case for taxes this year on comparisons to current tax rates. But traditional analysis has made comparisons to existing law. What's the difference? Existing law takes into account scheduled changes in tax policy. Current tax rates are a snapshot in time and may have an expiration date, as is now the case.

Tax rates right now are at a higher level than they were three years ago. Democrats want to assume this higher level as a baseline for discussing their budget proposals. In their only chart spelling out impacts for individual tax filers, Democrats compared their 2011 policies to existing, higher 2010 tax rates.

For example, Democrats say they want to raise the vehicle-license fee rate to 1.65 percent when it currently stands at 1.15 percent. That's a softer comparison than to the 0.65 percent it will be next July under existing law. Using the Democrats' comparison results in a smaller tax hike.

At the same time, Democratic analysis suggests that Democrats' tax swap would drop the state sales tax rate from 6 percent to 3.5 percent in July 2011, a 2.5 percentage point decrease.

But existing law already drops the rate from 6 percent to 5 percent in July 2011. That means the Democrats' sales tax drop next July is only 1.5 percentage point less than what it would be under existing law. But Democrats assumed the 2.5 percentage point decrease in calculating what taxpayers would save in the second half of 2011.

Aside from the tax increases on energy, income, vehicles, and businesses, among the most problematic provisions in the Democrats’ budget is the proposed tax on online purchases, commonly referred to as the affiliate nexus tax. The affiliate nexus tax has rightfully been rejected in California in the past and was vetoed by Governor Schwarzenegger just last year. Despite what some proponents claim, the affiliate nexus tax is a tax increase that will put California web-based businesses and advertisers out of work, as has been evidenced in other states that have passed such legislation. Americans for Tax Reform applauds Governor Schwarzenegger for his opposition to this proposal and any budget that includes tax increases.

For a copy of the letter that ATR sent to California lawmakers today in opposition to the affiliate nexus tax, CLICK HERE.

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Schwarzenegger Declares California Dems' Tax Hiking Budget Dead on Arrival


Posted by Patrick M. Gleason on Wednesday, August 4th, 2010, 6:55 PM PERMALINK

Politicians on Capitol Hill love to title legislation with lofty, high-minded rhetoric despite the fact that, in practice, the bill actually achieves the opposite and takes away that which it implies it will provide. ObamaCare’s official title is “The Patient Protection and Affordable Care Act.” Yet it makes health care less affordable. Another example is the Employee Free Choice Act, which would destroy employee free choice by removing workers’ rights to a federally supervised private ballot election for matters on unionizatoin, allowing for coercion and intimidation.

Democrats in the California state house are no different. Yesterday, California Democrats introduced their latest budget proposal, which they have dubbed the “Jobs Budget,” yet would levy billions in job-killing taxes increases.

This latest proposal entails higher taxes on energy production, web-based businesses, income, and cars. Senate President Steinberg and Speaker Perez also think they’ve discovered a slick maneuver by which they can sell their income tax hike/sales tax cut swap – which comes to roughly a $2 billion net tax increase – as an effective tax cut. However, as we pointed out on Monday, this proposal is based on flawed assumptions and their logic has numerous holes that render their claims of tax reduction just plain false.

To his credit, Governor Schwarzenegger immediately declared the Democrats’ budget dead on arrival. Americans for Tax Reform applauds Governor Schwarzenegger and legislative Republicans for standing strong in support of the Governor’s May budget, which rectifies the state’s $19.1 billion overspending problem with necessary cuts and no tax increases.

Below is a response to the Democrats’ newest budget from Republican Senate Leader Hollingsworth and GOP Assembly Leader Martin Garrick:

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Flawed Budget Deal Floated by California Lawmakers


Posted by Patrick M. Gleason on Monday, August 2nd, 2010, 8:53 AM PERMALINK

California lawmakers have returned to Sacramento and are gaveling back into session today, the 33rd day of the state’s budget impasse. While legislative Democrats and Republicans remain far from an agreement, a broad outline for a prospective deal being considered by budget negotiators was leaked last Wednesday and confirmed by Senate President Steinberg on Thursday.

The creative, yet flawed proposal entails raising income tax rates across the board and cutting the California’s sales tax – the highest in the nation, resulting in a reported $2 billion - $3 billion net state tax hike. Steinberg claims that the sales tax reduction, in conjunction with the fact that Californians can deduct state income taxes from their federal income tax liability will preclude most Golden State residents from seeing an increase in their overall tax burden. In an interview with the LA Times Steinberg claimed that people would probably pay less. However, Steinberg’s math and assumptions don’t add up.

Here are a few of the problems with Steinberg’s proposal:

  1. The Alternative Minimum Tax (AMT) is a huge problem in California. If you’re among the increasing number of Californians who gets sucked into the AMT every year, you don’t get to deduct state taxes from your federal income tax liability would see a substantial increase in your overall tax burden.
  2. In order to deduct California taxes from federal tax liability, you have to itemize your deductions. Two out of three taxpayers do not do this.
  3. For high earning California individuals and small businesses, itemized deductions phase out.
  4. This plan would also hurt Californians who would see their state income taxes go up, but don’t have a federal income tax liability from which to deduct. According to IRS data, 33% of income tax returns have $0 or negative income tax liability and the Congressional Budget Office reports that slightly less than half of families have a $0 or less income tax liability. Under Steinberg’s plan, families who fall into this category will face higher state taxes and have the same federal tax liability as before, the result being a sizable increase in their tax burden.

Those are a few of the problems with this proposal. But simplest and most important reason that it should be opposed is that it’s a net increase in state taxes. That right there makes it a violation of the Taxpayer Protection Pledge. All Republicans, save for Assemblyman Niello, have signed the Pledge. With California’s 2/3rds majority requirement to raise taxes, multiple Republican votes would be needed to pass this plan. Bottom line: some Republican lawmakers would have to violate a key commitment to their constituents to pass the agreement favored by Steinberg.

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Good Afternoon Pennsylvania Pledge Breakers


Posted by Patrick M. Gleason on Tuesday, July 6th, 2010, 12:41 PM PERMALINK

Today Pennsylvania Governor Ed Rendell signed the $28 billion general fund budget that passed out of both chambers of the General Assembly last week. However, it is widely understood that this budget deal is unlikely to hold up to economic and political realities, setting the state up for its day of fiscal reckoning next year when lawmakers will be forced to finally deal with the gimmicks that have papered over state overspending for far too long and the absence of federal stimulus dollars that have propped up PA’s bloated state government for the past two years. Next year lawmakers are projected to face a $5 billion structural deficit, along with a significant increase in pension payments.

The fantastical revenue assumptions in the new budget include $850 million in supplemental federal Medicaid funding that Congress has yet to approve and appears increasingly unlikely to do so at that. Even the most optimistic assessments have the state receiving $300 million at most from the feds, meaning that the FY ’10 – ’11 budget is unconstitutionally out of balance. Further calling into question the soundness of the new spending plan is it’s assumption of a 3% uptick in tax receipts in the new fiscal year, which began last Thursday. After two years of negative growth and remaining concerns about a double dip recession, this optimistic growth projection looks to compound the looming state fiscal crisis. Even lawmakers who approved the budget admit that it is technically not in balance.

Gov. Rendell and a number of legislators claim that they had already “cut to the bone,” yet that is a tough argument to make when one considers that the new budget represents an increase in spending from the previous year. These false claims of frugality are further debunked by the legislature’s approval, just three days after passing the budget, of $298 million in corporate welfare and pork for Gov. Rendell to handout as he sees fit. Included in this shameless package is $20 million in new spending on shrines to outgoing Sen. Arlen Specter and the late Congressman John Murtha.

While no tax increases were included in the budget itself, a handshake agreement to pass a job-killing severance tax on natural gas extraction was assumed. In fact, language alluding to this agreement was included in the fiscal code, which passed both chambers on July 3rd. As a result, ATR scored a vote for the fiscal code as a violation of the Taxpayer Protection Pledge, a written commitment that 29 members of the PA General Assembly have signed to “oppose and vote against any and all efforts to raise taxes.” The following lawmakers broke this promise to their constituents last week:

Senator Lisa Boscola (D-18)

Senator Gene Yaw (R-23)

Representative James Casorio (D-56)*

Representative Camille Bud George (D-74)*

Representative Richard Grucela (D-137)*

Representative Ted Harhai (D-58)*

Representative Joseph Petrarca (D-55)

(*Denotes those who broke their Pledge last year as well)

Pennsylvania lawmakers have until October 1st to work out the details of the severance tax, which is to become effective no later than January 2011. However, don’t be surprised if Rendell and Co. come calling for further tax increases beforer that time when their new budget, which has been accurately described as a “house of cards,” falls apart.

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California Democrats Fiddle While Sacramento Burns


Posted by Patrick M. Gleason on Tuesday, June 29th, 2010, 4:39 PM PERMALINK

As we approach Thursday’s beginning of a new fiscal year in California one thing is clear, lawmakers will not reach a budget agreement on time yet again. In fact, legislators will be heading home at the end of the week for summer recess without a budget. The good news – legislators won’t fruitlessly be sitting around Sacramento and collecting their $142 per day allowance with no budget to vote on.

The two Democratic caucuses have each laid out a budget plan, both calling for higher taxes. Legislative Republicans are backing Governor Schwarzenegger’s tax hike-free budget that makes tough but necessary cuts.

In a presser yesterday afternoon touting Assembly Democrats’ budget proposal, Speaker John Perez (D-L.A.) placed blame for the impasse on the state’s 2/3rds supermajority vote requirement to pass a budget and ridiculed it irrational. Here Perez completely misses the point. It’s one thing if he wants to do away with the 2/3rds requirement to pass a budget - fine - but that still wouldn’t allow his tax hike-laden budget to overcome the supermajority requirement to raise taxes, which 16 other states also have in place. It’s a little hard to argue that the solution to California’s overspending problem is to make it easier to raise taxes in a state with already one of the most onerous tax burdens in the nation. The fact is that this taxpayer safeguard is the only thing that has prevented Democrats from completely opening the tax hike floodgates on Californians.

Assembly Democrats’ budget proposal relies on a new tax on energy and securitization of the beverage recycling fee. However that doesn’t come close meeting the revenue required for their spending wish list. There they want to make up the difference with more borrowing. It is because of such economically illiterate leadership in Sacramento that JP Morgan Chase chairman Jamie Dimon recently warned investors that he is more concerned about California defaulting than Greece, or that CMA has listed California alongside Iraq, Venezuela, and Pakistan as governments with the highest sovereign debt default risk.

What is – to use Speaker Perez’s own words – irrational is the fact that despite a $19.1 billion “deficit,” Perez and his colleagues have spent the past few weeks debating things like changing the state rock, dubbing June 14-20 California Golf Week, banning plastic bags, and in a move that will surely warrant a strongly worded letter from the Salahis, taking up legislation that would criminalize crashing the Oscars and other black tie events.

It is unfortunate and troubling that a state that used to be the economic engine of the nation (that title now belongs to Texas) has sunk to such depths by following the model that Reid, Pelosi, and Obama are busy implementing in Washington. In the following video, Republican Assembly Leader Martin Garrick (R-San Diego) explains just how California Democrats are fiddling while Sacramento burns:

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Pennsylvania Budget Deal Remains Elusive as Deadline Approaches


Posted by Patrick M. Gleason on Monday, June 28th, 2010, 10:14 AM PERMALINK

While many people spent the past two days by the pool, at the beach, or enjoying the World Cup, baseball, Wimbledon, and the host of other sporting events taking place, Pennsylvania legislators spent the hot and muggy weekend in Harrisburg trying to work out a budget agreement amongst the four caucuses and Gov. Rendell.

Legislative leaders and Rendell spent most of Saturday in meetings trying iron out their differences. Rendell still wants a $29 billion general fund budget that includes a severance tax on natural gas and higher taxes on tobacco products. Legislative Democrats support a slightly reduced budget, but one that would still necessitate higher taxes. Senate Republicans continue to push for a $27.8 billion budget that would include no tax increases.

Each plan is reliant on $850 million in additional Medicaid money from the federal government, which last week appeared less certain of coming to fruition. Without the money, Rendell claims that as many as 20,000 government jobs will be cut. Even with the money, Rendell warns as many as 1,000 could be cut, which he also decries as a tragedy.

At the risk of sounding callous, cry me a river. What Rendell fails to mention is that Pennsylvania’s public sector has been detached from fiscal realities for years and the state has continued to add employees to the public payroll at a time when the economic downturn has precipitated substantial job losses in the private sector. According to Commonwealth Foundation analysis of Bureau of Labor Statistics data, between 2000 and 2009 Pennsylvania’s private sector shrunk by 113,600 jobs while the public sector grew by 40,200 bureaucrats, whose salaries, mind you, are dependent on the Keystone State’s shrinking private sector.

The deadline to pass a budget is this Wednesday, although that is not exactly a firm deadline as PA lawmakers have failed to meet it for the last seven years. ATR urges Pennsylvania residents to contact their representatives in Harrisburg today and urge them to reject the job-killing tax increases being pushed by Rendell and legislative Democrats. To do so, simply click HERE.

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