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Should Family Businesses Pay the “Death Tax”?

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Family farms are now exempt from the Pennsylvania inheritance tax under a new state law enacted last year.  Now there appears to be bipartisan support for doing the same thing for family businesses.  “When we tax these assets in a small business… at the death of one of the principle owners, oftentimes what happens… is critical business assets have to be liquidated in order to pay the tax bill,” explains state Rep. Stephen Bloom (R-Cumberland), the prime sponsor of a bill to eliminate the so-called death tax on mom & pop shops. 

Bloom’s bill has already advanced out of the House Finance Committee with a vote of 20 – 4, and has since been re-referred to the Appropriations Committee. 

While the bill would nix close to $10-million dollars in state revenue, Bloom believes the economic activity it would create can more than make up for the cost.  “We want to reward our folks who’ve been frugal and generated assets and are growing jobs in this state we don’t want to punish them.”    

Opponents have several complaints in addition to the lack of offsetting revenue.  The Pennsylvania Budget & Policy Center believes the bill would create a new set of inequities and loopholes, thereby shifting more of the state’s tax burden onto middle-class families. 

The House has recessed for three weeks of budget hearings.  Session is scheduled to resume on March 11th.

State Gov’t Transparency, Accountability Website Goes Live

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A website called “PennWATCH” is marking a new day transparency in state government.  The name is short for the Pennsylvania Web Accountability and Transparency Act, which passed the General Assembly unanimously and was signed into law in June 2011. 

The site was under development for over a year, until Governor Tom Corbett helped to flip-the-switch last week.  “It creates trust between the citizens and the government,” Corbett says.  “It allows people to understand – hopefully – policy, so that they can make informed decisions about how to be useful citizens in a democracy.  And, hopefully, it prevents scandal.” 

The goal, Corbett says, was to make PennWATCH user-friendly.  By logging on, the public can access government records on payments, contracts, budgets & revenues, and even state workers’ pay.   

Coming in early 2013, the employee salary information will be updated to reflect total compensation, which includes the cost of benefits. 

Secretary of Administration Kelly Powell Logan says updates to the PennWATCH site, which will not require additional legislative action, are already being considered. 

State officials have not compiled a cost estimate for the website, but Governor Corbett notes that all the work was done “in-house.”

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New Reports Indicate Brighter Revenue Future

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April’s General Fund collections topped expectations by $99-million dollars, according to the Department of Revenue’s latest report.  It’s the state’s third straight month in the black, but fiscal year-to-date revenues are still running $288-million below estimate. 

On the same day as the monthly report from the administration, the Independent Fiscal Office released its initial revenue estimate.  “We think the year-end shortfall will be $300-million dollars,” says IFO Director Matt Knittel.  That’s a marked improvement over the $719-million dollar shortfall that Governor Tom Corbett projected when he made is budget address in February. 

“We are seeing additional economic strength moving forward… and we think a lot of that strength will carry forward into FY2012/13,” Knittel says.   His office will release its official revenue estimate in mid-June. 

 Senate Democrats are hailing the dual reports as reason to overhaul the governor’s proposed budget for the new fiscal year.  “There is now no question that there will be far more available dollars to restore key budget lines that support job creation, education, safety net programs and investments for the future,” says Senate Democratic Leader Jay Costa (D-Allegheny). 

Governor Tom Corbett has previously expressed the desire to finalize budget plans once the May numbers are available.  We’ll hear his latest fiscal observations on next week’s “Ask the Governor.”

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State Revenue Picture Brightens

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Vincent Hughes

State Sen. Vincent Hughes

General Fund collections lagged expectations in each of the first seven months of the fiscal year.  The state got a reprieve in February, when the state collected $15-million more dollars than expected.  March was an even better month for the Commonwealth, as the Department of Revenue reports that collections topped expectations to the tune of $95-million. 

Governor Tom Corbett’s February budget addressed was based on an estimated year-end shortfall of $719-million; the year-to-date shortfall currently stands at $387-million.       

“We believe the deficit is probably going to be closer to $300 – $350-million dollars,” says Senate Democratic Appropriations Chair Vincent Hughes. 

Senator Hughes tells Radio PA that he’ll be keeping a close eye on revenue collections this budget season.  “I think it’s going to change over the next days and weeks, as we go forward,” Hughes says, “thereby creating new revenue for us to reinvest in the people of the Commonwealth.”

Senate Democrats view a revised revenue estimate as one of the keys to restoring cuts to educate, human services and other funding priorities. 

Last month, Governor Tom Corbett told us that it was too early to revise the revenue estimates.  We’ll check in with him again this week on the April edition of Ask the Governor.

Corbett Administration Projects Half-Billion Dollar Budget Shortfall

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The economic forecast took a turn for the worse after the state budget was passed, and it’s showing up in tax collections that are already running $345-million dollars below expectation.  Budget Secretary Charles Zogby estimated a shortfall of $500-million dollars by the end of the fiscal year.  “I tend to think that this is an optimistic scenario,” Zogby said at the mid-year budget briefing.  “I think we’re expecting and planning for a much bigger shortfall.” 

Budget Secretary Charles Zogby addressed the media on Tuesday.

Budget Secretary Charles Zogby addressed the media on Tuesday.

Zogby’s office is currently working on options for a budgetary freeze, which Governor Tom Corbett could act upon by the end of the month.  “That will help alleviate – to an extent – the FY2012-2013 challenges that we’re facing.” 

Taking into account the revised revenue outlook and projected growth in mandatory spending, Zogby estimated that the administration will have a $750-million dollar budget hole to fill in order to balance next year’s budget.   “Right now I’m looking at the expenditure side, no tax increases,” Zogby added. 

State Rep. Joe Markosek

State Rep. Joe Markosek

While Governor Tom Corbett will deliver his budget address in early February, Democrats say it’s premature to be projecting such dire budget circumstances next year.  “The governor is using scare tactics to make his case for cutting another three-quarters of a billion dollars in needlessly painful cuts next year,” House Democratic Appropriations Chair Joe Markosek (D-Allegheny) said at a capitol news conference.  Markosek contends that year-to-date revenue collections are actually up when compared to the same five-month period last year.

Sate Capitol View from Commonwealth Ave.

Q1 State Revenues Miss the Mark

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The first quarter of the state’s fiscal year is in the books, and the numbers tell the tale of a flagging economy.  “All the major tax categories were below estimate for the month, so clearly the economic conditions are having an impact on tax collections,” says state Revenue Department spokeswoman Elizabeth Brassell, while discussing the latest revenue report.

September’s General Fund collections were $151.8-million (6.1%) below estimate, which means state revenues are now $215-million (3.5%) below projection for the fiscal year-to-date.  Sales taxes have come in 1.4% below estimate, personal income taxes are 4% off the mark, and corporation taxes are nearly 13% less than anticipated so far this fiscal year. 

Gov. Tom Corbett talks to the media at the state capitol.

Governor Tom Corbett says he’s watching the situation closely and is paying particular attention to the month of October.  “We kept aside $700-million.  Our goal was to go into next year with $500-million on hand, you’d kind of like to have money on hand going into it,” Corbett said during a question and answer session with the media on Wednesday. 

The $700-million that Corbett refers to was the unallocated revenues remaining at the end of FY2011.  Corbett continues to stress that was not a surplus.  “If the revenue decline isn’t indicative of that, I don’t know what else is.”