According to sources in Harrisburg, Governor Ed Rendell is dropping his proposal to apply the state sales tax to 74 new goods and services that are currently exempt. This is good news for Pennsylvania taxpayers, as the measure would’ve resulted in a $531 million net tax increase next year and a subsequent $900 million increase the following year.

Another good reason that Rendell has backed off this measure is that it would have been a job killer in a state where unemployment is approaching double digits. The Commonwealth Foundation has concluded, based upon the Pennsylvania State Tax Analysis Modeling Program (PA-STAMP), that had this sales tax increase gone into effect, it would have consequently cost the state 10,000 private sector jobs in 2011, followed by 15,000 in 2012.

In addition to this modification, Gov. Rendell is modifying the proposed cigarette tax from 30 cents a pack to 10 cents a pack. Rendell, however, remains very supportive of efforts to impose a new tax on  the extraction of natural gas from the Marcellus shale formation. Although Senate President Pro Tempore, Joe Scarnati, doesn’t see how it can be incorporated into the FY 2011 state budget, Rendell and the Democratic House members and groups aligned with their agenda are hell bent on it. Regarding the logistics of this particular tax, the Pittsburgh Tribune-Review recently reported:

The highest rate proposed is 8 percent of the value at the "wellhead" — where gas comes out of the ground — plus 7 cents per 1,000 cubic feet of natural gas extracted. Another proposal suggests 5 percent at the well and 4.7 cents per 1,000 cubic feet of extracted gas.

The fact is that Pennsylvania’s economy, much like numerous other individual state economies, is inundated with debt; debt that seems to continually compound whenever taxes and revenue projections are raised. Pennsylvania and other state economies have aptly demonstrated that there has indeed been a correlation between higher taxes and higher debt levels. Rescuing Pennsylvania’s overspending problem will not be solved with higher and newer taxes. It is imperative that Gov. Rendell and his Democratic colleagues adhere to this truth as they reach the final stages of devising Pennsylvania’s upcoming budget. ATR will continue to stay in touch with Keystone State lawmakers and urge them to craft a budget that does not include higher taxes on overly-burdened Pennsylvania taxpayers and employers.