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Sep 15, 2017

Pennsylvania CPAs Split on Ways to Close State’s Deficit

Jim DeLucciaBy Jim DeLuccia, PICPA communications manager


Pennsylvania has a nearly $3 billion structural deficit, and it continues to grow. In August 2017, Pennsylvania CPAs completed a brief PICPA survey on how they think the state should help close this deficit. Respondents were asked if Pennsylvania should increase the personal income tax (PIT) rate, expand the sales tax to other services or products, or offer another suggestion. The results were tight (as seen in the chart below), which highlights the complexity of the issue the state is facing.

Poll Results Graphic: How Should PA Close Its Deficit?

Just a tick over one-third of respondents felt an increase to the PIT was the best answer, a measure only reluctantly discussed in the capitol halls. An increase to the PIT, many believe, would be the simplest way to close the deficit because of the revenue it could generate (for example, a 0.10 percent increase raises over $325 million). It would also eliminate the need to borrow or raise other taxes. But more than half of respondents felt that neither raising the PIT nor expanding the sales tax was a good option, and that other measures should be taken.

A variety of different tax options and curtailing of state pensions were the most popular “other” answers provided. Pennsylvania’s state pension funding crisis is a hot topic among members. Some progress was made in this area with the passage of Act 5 of 2017, but many members feel the recently passed reform did not go far enough. The PICPA acknowledges the imperfections of the bill, but sees its passage as one step in the right direction. The PICPA’s Fiscal Responsibility Task Force has proposed other solutions to help fix this problem in its latest issues brief. Jason Skrinak, CPA, a member of this task force, outlined some other deficit-closing options in an appearance on ABC-27 in Harrisburg.

Several respondents called on the state to forgo any additional taxes, and instead felt the legislature should decrease or better control spending. Placing third among the “other” respondents were suggestions that the state should tax retirement income or impose a tax on natural gas production.

The “expand the sales tax” option garnered just 10 percent of votes, which is unsurprising as this measure could adversely affect CPAs conducting business in Pennsylvania. Even though a recent letter ruling helped to clarify what taxable support work is in Pennsylvania, the state could rule that some consulting services previously deemed as exempt may indeed be subject to tax.

The PICPA also asked members what, if any, advice they are providing clients regarding Pennsylvania’s deficit. The majority of respondents are not providing any advice at this time because so few of their clients are concerned about the issue. Several members, however, said they advise their clients to be prepared for a tax increase. Others inform their clients to cut spending and balance their budgets, while some suggest that clients contact their legislators to persuade them to take a different approach to solve the deficit issue.

While Pennsylvania CPAs are divided on how best to solve the state’s structural deficit, most of the respondents were united on one cause: the state needs to become more fiscally accountable for its decisions. The PICPA’s government relations team actively listens to your concerns. The PICPA and its members work tirelessly to promote sound tax and fiscal policies to legislators on behalf of the state’s business owners, consumers, and CPAs. If you would like to get more involved and make a difference, subscribe to PICPA’s Legislative Update to keep current on all the latest news and consider contributing to the CPA-PAC.


Note: The survey was based on 459 PICPA member responses collected Aug. 14-18, 2017.



8 comments

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  • Peter Calcara | Sep 28, 2017

    Todd, first, thank you for your input. It is always beneficial for the PICPA to hear from our members and non-members on issues that impact the public. PA does have one of the largest state legislatures in the country. It’s total operating budget for the 253 members (203 Representatives and 50 Senators) and staff of the legislature is around $325 million of the Commonwealth’s $81 billion Operating budget for FY 2017-2018. There are legislative efforts to reduce the size of the legislature and each year the proposal seems to get closer to making its way to the governor’s desk. PICPA does not have a position on the proposal. Additionally, the PICPA’s 2013 Report of the Fiscal Responsibility Task Force encouraged the legislature to evaluate and streamline programs where appropriate, and it continues to be a position that we communicate with PICPA members and the public. Thanks again for offering your thoughts and opinions on this timely topic. 

    Peter Calcara, VP of Government Relations, PICPA

  • Todd | Sep 27, 2017
    I also don't agree with increasing revenue but reducing costs instead.  It is my understanding that PA has one of the largest legislatures in the country.  Why cannot that be reduced?  Also, we are being asked our opinion and other CPA's are reading our thought and ideas.  Are these suggestions being presented to our legislators by the PICPA?
  • Joe | Sep 27, 2017
    Has anybody looked at teachers' and other state workers' bloated pensions?  They've got to be a big part of the problem! 
  • Gary Kolczynski | Sep 27, 2017
    The problem with the state budget is not a revenue problem. An income tax rate of 3.07% and a sales tax rate of 6.0% should be quite adequate. Our legislators in the past had advised us that these rates were appropriate. The problems are that spending is OUT OF CONTROL and current government is MANAGING A DIEING ECONOMY SO THAT REDUCED INCOME PRODUCES LESS TAX REVENUE. Raising tax in any way is an admission of government mismanagement. Harrisburg needs to get their collective heads together to live within their means and stop begging for more money. They are behaving like panhandlers.
  • James | Sep 18, 2017

    The state receives more than enough revenue.

    The problem is absolutely on the spending side.

    State employees need to be accountable and state employees need to be more productive, that is increase the amount of output for the same or less level of input.  When many could easily be in the 20% range now, there is plenty of room for improvement.  Productivity has nothing to do with "working Hard".  It is about working smart.  It can be about working faster, which is not necessarily easy to get someone to do in their current position, but necessary nonetheless.

     

  • Richard Shorin | Sep 18, 2017

    Don't know how the legislature/governor thinks a budget was passed in June, when it is still not balanced in September.

    It is still bizarre that PA cannot enact a tax on natural gas production- like EVERY other state of significance has

     

    Rick

  • Commonwealth CPA | Sep 18, 2017

    This is a totally inadequate survey, when the question is how do we squeeze more money of taxpayers and asccepts the premise that spending is a given that cannot, will not and should not be controlled.

    As a CPA working iin the Commonwealth, I can tell you that there is no tax increase that will not be spent on some new or existing program-it is an immutable fact of government that "enough" to legislators is "just a little bit more".

     

     

     

  • Richard | Sep 18, 2017
    Interesting that all the options relate to increasing revenue... no options on cutting costs/expenses?

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