Pennsylvania Senate Passes GOP’s $3B Tax Reduction Plan Despite Democrat Opposition

HARRISBURG, Pa. (AP) — GOP Proposes $3B Tax Cut in Response to Democratic Gov. Shapiro’s Budget Plan

The Republican Party has proposed a $3 billion tax cut, their counterproposal to Democratic Governor Josh Shapiro’s budget plan. The main focus of the proposed legislation is how to utilize the massive cash surplus in the state treasury.

Republican Senate Advances Tax Cut Legislation

The tax reduction plan, which targets income and electric service taxes, has been passed by the Republican-dominated Senate with a 36-14 vote. This move signifies the Republican’s top budget priority as we approach the new fiscal year commencing on July 1.

Historical Significance of Proposed Tax Cut

According to Republicans, this proposed tax cut would be the largest in the state’s history.

Budget Negotiations: Spending Boost vs. Tax Cut

The coming weeks will see budget discussions heavily focusing on Shapiro’s bid to increase spending by $3 billion, juxtaposed with the Republican’s counterproposal to cut taxes by the same amount. Despite support from eight out of 22 Democrats, top Democrats opposed the bill, predicting its failure in the Democrat-controlled House.

Republican Priorities and State Surplus

Republicans stated that their proposed bill was intended as a marker for their priorities after witnessing Democrats’ plans to spend the state’s considerable surplus.

Impact of Proposed Tax Cuts on PA Economy and Households

Republicans argued that such tax cuts would improve household budgets and stimulate the economy in Pennsylvania, a state striving to enhance its growth and appeal to keep pace with faster-growing states.

Addressing PA State Surplus

As per Shapiro’s administration, $14 billion is expected to be in reserve by the end of June, a subject that has spurred significant debate in Harrisburg. In a statement, Shapiro didn’t specify his support for the proposal but welcomed a discourse about the utilization of the state’s surplus.

Democrats’ Critique of Republican Tax Cut Proposal

Democrats criticized the proposed tax cut legislation for lacking transparency and public school support. They also proposed tax breaks for the lowest earners which were rejected by Republicans.

Senate GOP’s Tax Legislation Details

The Senate GOP’s tax legislation seeks to reduce the personal income tax rate from 3.07% back to the 2.8% mark—where it was before lawmakers raised it in 2003 to cover a deficit amidst a struggling economy. The proposed bill also aims to eliminate the 4.4% gross receipts tax on the profits of private electric utilities, a tax dating back to the 1800s which is passed to commercial and residential electric customers.

Gov. Shapiro’s Budget Proposal

Shapiro’s $48.3 billion budget proposal, unveiled in February, projected a $3 billion increase in spending, or about 7%, while using Pennsylvania’s abundant reserves to help fund it. The proposal would reduce the state’s cash reserve from $14 billion to $11 billion.

Republicans’ Response to Shapiro’s Spending Plan

Republicans warned that Shapiro’s spending plan could deplete the surplus within a few years and necessitate a tax increase, given the state’s slower-growing tax collections. The surplus began accumulating during the COVID-19 pandemic, when billions in federal aid helped cover some bills the state would normally pay, and rising inflation boosted tax collections on income and sales.

Follow Marc Levy on Twitter @timelywriter.

Copyright 2024 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.