Mensch Says Senate Must Study Rendell Budget for Cost Savings

Governor proposes new taxes, eliminating sales tax exemptions

The Senate must look for costs savings and ways to reduce inefficiencies in state government as it studies Governor Rendell's $29 billion General Fund budget request for Fiscal Year 2010-11, said Senator Bob Mensch (R-Bucks, Lehigh, Montgomery & Northampton).

The budget proposal unveiled today includes a $1.15 billion (4.1 percent) increase in spending.

"I really do believe that we have to be much more serious about finding greater efficiency within state government, cutting where we can,” Senator Mensch said. "We need to eliminate wasteful spending and inefficiencies. We've grown state government by 40 percent in the last seven years. That's $12 billion that has been added to state spending. That's whole a lot of money and you have to ask yourself, ‘Where is it going?' We need to get our hands around what we are doing first before we continue talking about expanding government. Let's be responsible to the people back home, it's their money.”

In his remarks Tuesday before a joint session of the Legislature, the Governor proposed to impose new taxes and eliminate sales tax exemptions to create a Stimulus Transition Reserve Fund. Rendell recommends imposing new taxes on Marcellus Shale natural gas extraction and on "other tobacco products” – cigars and smokeless tobacco. Governor Rendell also proposes the elimination of the 1 percent fee granted to vendors for collection of Pennsylvania's sales tax.

The Governor's plan calls for a decrease in Pennsylvania's sales tax from 6 percent to 4 percent coupled with the elimination of 74 current exemptions to that levy.

"I'm concerned about the sales tax issue, going from 6 percent to 4 percent,” Senator Mensch said. "Many people are going to fixate on the 4 percent and say they are going to pay less. But in reality, you're going to be paying 4 percent on more items, so it is a tax increase. It's not a tax decrease. Surely we need more revenue, but we have a budget that's asking for $1.15 billion more dollars. Spending has grown again and I am not sure we have the revenue to sustain it.”

The Governor also wants to close the "Delaware Loophole” through combined reporting by multistate and multinational firms of their income and expenses for tax purposes.

"One thing the Governor proposed today that was very good is reducing the CNI (Corporate Net Income Tax) and the Net Loss Carry forward, but he's tying to the Delaware Loophole or combined reporting,” Senator Mensch said. "In reality that problem was created when we raised our corporate net income tax. The reason corporations incorporate in Delaware is because they have a more favorable tax rate. So we are chasing these businesses from our own state. To say want to close that loophole now, we could actually begin to lose some employers. There are many along our borders who could move to other states.”

The Senate's review of the budget proposal will formally begin on February 16 with three weeks of hearings conducted by the Senate Appropriations Committee. The state's current fiscal year ends on June 30.

Audio and video of Senator Mensch's comments on the Governor's budget proposal are available at www.senatormensch.com .