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Prevent Tax Hikes in Budget!
An Open Letter to the Pennsylvania Legislature
June 9, 2010
As you and Governor Rendell work toward crafting a new state budget, I write on behalf of the National Taxpayers Union's 17,200 Pennsylvania members and urge you to reject any proposal to increase taxes as part of the package.
For example, a tax increase on tobacco products is the last thing that Pennsylvanians need in the midst of a recession. History shows that tobacco taxes consistently fail to produce promise revenues. A proposed 30% tax increase on the retail price of cigars and smokeless tobacco products would harm small retailers, such as convenience stores along Interstate 81 and cigar shops in Bucks County, who will see sales diminish as consumers seek out less costly products in neighboring jurisdictions. Further, a tobacco tax would also impact small farmers in the Commonwealth, many of whom grow tobacco to supplement their income.
Additionally, a severance tax on natural gas production would only increase energy costs for consumers and stifle gas production in the Commonwealth. Energy companies will pass the cost of the tax onto consumers in the form of higher utility bills. According to the Commonwealth Foundation, states with severance taxes, such as West Virginia, have not experienced as much growth in the energy sector, including job creation, as states without a severance tax. Many other states, such as Texas and Arkansas, have delayed or reduced their severance taxes to encourage more natural gas production. Given the recent opening of the Marcellus Shale area, Pennsylvania should use this opportunity to expand and invest in the state's energy sector, which would offer benefits to all Pennsylvanians through cheaper energy and more jobs, not higher taxation.
Rather than raising taxes, the best way to solve Pennsylvania's budget problems and clear the path to prosperity is to trim government spending and reform taxes. Governor Rendell's proposed $29.3 billion budget is four percent higher than last year. This recession has forced Pennsylvanians to prioritize their expenses and then cut what they cannot afford. It is only reasonable for their government to do the same in crafting the next budget. Moreover, Pennsylvania has the eleventh-highest tax burden in the nation, which includes some of the worst corporate tax rates in the country. By reducing government spending and reforming taxes, Pennsylvania can address its budget deficit while also laying the groundwork for economic growth. Our members are counting on you to do so, and avoid raising taxes.