Reaction Expected to Rendell's Proposal to Start Taxing Caskets, Toilet Paper and Many Other Things

[JPZenger]

http://media.pennlive.com/midstate_impact/other/2010-11_Budget_Document_CD.pdf

The above link is the complete text of Rendell's new budget proposal.

The item that is getting the most attention is Rendell's proposal to extend the sales tax to additional items. The budget says 74 exemptions exists from state sales tax, including caskets, toilet paper, gum, candy, toothpaste, hygiene products, helicopters, school buses, water bills, sewage bills, etc.

It is not totally clear if Rendell wents to get rid of all of these exemptions. For example, the helicopter exemption was established to avoid harm to the sales of a major employer, Boeing's helicopter division. The magazine subscription exemption was created when Rodale threatened to move out of the state. PA. is a major manufacturer of school buses and fire equipment. Adding a sales tax on newspapers would make that industry freak because they are having such severe problems.

Rendell said if we tax everything, we can drop the sales tax by 2%. It would be smarter politically to leave the tax at 6% and then just add a few items that are needed to generate additional revenue (such as candy and gum, which most states tax).

I predict the tea baggers, Corbett and every Republican candidate for state office are all going to use this proposal to attack Dems.

[JPZenger]

1. Rendell wants to tax cremations, textbooks, veterinary services, etc.

Rendell wants to extend a 4% tax on practically everything, including cremations, veterinary services, textbooks. legal services, architectural services, flags, engineering services, etc.

[happyslug]

2. Rendall wants to tax food and clothes, that is were the money is

At present most food purchased in Grocery stores are tax exempt (In Restaurants you pay a tax, but NOT in the Grocery store for your own use). The same with clothing. People boy volumes of both and thus increase revenues. The other items are minor, when it comes to revenue. How much, on average, does one pay for cremations, veterinary services, textbooks. legal services, architectural services, flags, engineering services? Most people only die once and thus would only pay the tax on a cremation of coffin once. Many people on this board are Collage students, but once you are out of Collage you never by a Textbook again (Except when your kid gets to Collage, School books for High School and Grade Schools students are provided by the School). When was the last time you saw a lawyer? Bought a flag (Flags can last decades), paid for architectural or engineering services?

Compare these items to the big items for sales tax, Automobiles. People tend to buy a new (to them at least) car every 4-5 years (It has been growing longer over the last 10 years but that is beside the point). Every year you need to do repairs, parts, tires etc on a car are all taxable. The Key is NOT that Automobiles are taxable is that into today's society a sales tax on Automobiles is a steady stream of income. Even if someone decides to keep the car and do repairs instead, the state gets sales tax revenue. Household goods are another source of steady income, you buy a new stove, washer, dryer or Refrigerator every ten years or so BUT you do buy light bulbs, cleaning supplies and other household items on a steady almost daily basis.

I mention the above for if you look at the items Rendall Claims he wants to expand the Sales tax to, do NOT produce that much additional revenue. On the other hand Clothing and food does. Now I am NOT advocating an increase in Sales Tax to food and Clothing, I prefer an Income Tax increase (Or even a real estate tax) both are fairer in the sense the poor can adjust to avoid such taxes (Real estate, if based on value of the property, the poor just move to cheaper housing, Income tax is Income Based so NOT an additional problem for the poor), but MUST buy Clothing and Food.

Henry George in the late 1800s came up with his three rules on income:
1. As Income goes up, the percentage spent on necessities go DOWN (You can only eat so much food).
2. As Income goes up, the percentage spent on Luxuries goes up (More money,easier to buy something you want but don't need).
3. As Income goes up, the percentage spent on housing stays the same (More money, you move up in housing but people tend to keep the percentage spent on housing about the same).

Now, Henry George was NOT a professionally trained economist, but an astute observer of the world. In his travels he noted several things including how taxation affects people's activities. For example he noted that in his travels he visited one country that tax Palm Trees for they tended to be on property of the rich. What was the result? All the Palm Tress were cut down to avoid the tax. On the other hand it is hard, if not impossible to destroy land. Thus he was a great advocate of land taxation as the fairest form of taxation. Now he did NOT advocate taxation on improvements to the land, just the land itself. Thus he would tax your home based on the value of the lot it is on, NOT the house value. The Value of the lot is based on its location more time then anything thing else. A corner lot at an intersection of two main highways is worth more a lot on a dead end in suburbia (Which will be worth more then a house in a Ghetto, do to its location and the perception that suburbia is a better place to live then a Ghetto). It is these land value Henry George wanted to tax. Business hates Henry George. Remember the old saying of the three things makes a successful business, Location, Location, Location (Thus why the Corner lot at the intersection of two highways are so valuable). Businesses want the best location and willing to pay the most money for such location. Henry George says that is OK, but any tax on that property should be based on the value of the location NOT what is built on it. Business hates this and want to shift the tax burden to the general public i.e. away from taxation of the land and more to taxation on the value of the land, thus shifting taxes to people's homes and away from their business. Business also hates Incomes taxes, preferring sales taxes for it shifts the tax from themselves to that of the people who NEED to buy things. Remember the rich (and businesses in general) do NOT buy things, their either own things OR invest in things. In a Sales Tax situation owning things and investing in things are NON-taxable events. Thus with a sales tax taxation shifts from the wealthy to the poor and is thus liked by the investment class. The fairest tax is a tax on Real Estate. An Income tax can be as progressive as a sales tax is regressive and for that reason preferred but lets get serious, what Rendall wants to do is increase revenues WITHOUT increases the taxes on the "investment class" thus an increase in the Income Tax and any real estate tax is dead in the water. That leaves the Sales tax and what Rendall wants to do is remove the remains of the efforts over the last 100 years to make the sales tax less regressive, that is tax food and Clothing. Sales tax revenue from the other items are NOT high enough to be worth the switch, on the other hand sales tax on food and clothing will bring in enough revenue WITHOUT having to increase taxes on the rich (Again I have to say I prefer an Income tax increase but that is NOT even being proposed).

[JPZenger]

3. Medical bills, clothing and non-candy food would remain untaxed

It has been clarified that medical bills would not be taxed, but veterinary bills would. Clothing and food would remain untaxed (except candy and gum). Bank fees would be taxed along with a list of 72 other categories that are currently exempt.

[Number9Dream]

4. More bad ideas from Rendell

Back in 2002, when Ed Rendell was running for Governor, he was constantly on TV saying that "reducing property taxes" would be his "number one priority". Remember? He gave PA an optional Act 72 which was rejected by most school districts. Later, a poorly written Act 1 was rejected by the voters. Property taxes go up every year and are higher than ever. Rendell's number one priority has been a dismal failure. Now here's another bad idea from the Rendell administration.

I agree with happyslug that an increase on income tax for wealthy Pennsylvanians (income level to be determined) would be much better than this sales tax mess. I'll bet there's also a lot of waste which could be trimmed from the budget.

From The Allentown Morning Call:

http://www.mcall.com/news/local/all-a1_5salestax.7174503feb11,0,5660264.story

snip> A tax on veterinary services ''will impose a hardship on the pet-owning public and agricultural producers in an already bad economy,'' said Charlene Wandzilak, executive director of the Pennsylvania Veterinary Medical Association. ''The additional tax could be the tipping point that puts responsible animal owners in a difficult position when deciding what is best for the animal and what they can afford.'' It would also discourage prospective pet owners from adopting from shelters.

snip> The proposal to tax residential electric service would hurt everyone, particularly low-income electric customers, said George Lewis, a PPL Electric Utilities spokesman. Besides, he noted, it's already subject to the state gross receipts tax.

snip> And if you think you'd be better off using a stove or fireplace instead of electric heat, the Rendell administration would get you again. The plan would tax firewood sales, too.