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Missed Opportunities
for Pennsylvania To Capture Revenue:
Policy Brief from Mars Research & Retrieval Services
May 15, 2006
The second largest industry in the state
of Pennsylvania is the Tourism, Hospitality, and Amusement
industry. Before the presence of gaming establishments anticipated
to arrive in 2007-2009, this industry currently employs approximately
650,000 Pennsylvanians. That figure will likely grow in the
near future, as employment opportunities present themselves
associated with the gaming establishments and site locations
incorporating entertainment and amusement venues. With that
in mind, Pennsylvania can anticipate higher tourism rates
in this industry and more significantly, has the great opportunity
and potential for capturing revenues not currently garnered
by the state through policy implementing a statewide sales
tax.
As a result of gaming establishments, many
people entering into the state either for employment purposes
and/or entertainment purposes related to these industries
will be utilizing increased state resources and state facilities
without paying anything for these services. In addition, Pennsylvania
has two state of the art airports located in Pittsburgh International
Airport and Philadelphia international Airport. Any and all
individuals can potentially walk into either of these airports
and purchase goods and services without paying any sales tax.
Both of these airports have hundreds of people pass through
these gateways on their way to various destinations via travel
and transportation and not pay a sales tax for a newspaper
at the retail in-house airport shop. Both of these airports,
like many across the country, have distinguished themselves
with airport malls for shopping purposes and again, there
is no sales tax on clothing and/or items sold and no revenue
captured for the benefit of Pennsylvania to utilize for various
other purposes. A recent walk through the Pittsburgh airport
has a broad billboard located in the main terminal above the
departure and arrival monitors heralding “We have No
Sales Tax”.
Airports in Illinois, North Carolina, California,
and most states throughout the country have a state sales
tax. For example a newspaper purchased in Charlotte’s
Douglas Airport, will sell for .79 cents, and the same USA
Today newspaper in Pittsburgh’s airport is sold for
.75 cents….North Carolina is picking up .4 extra cents
on every newspaper sold because of their sales tax. I as a
traveler passing through Charlotte making a connection and
on a layover am going to pay for it regardless, as I want
to read the newspaper. We have so many people visit and pass
through our states utilizing our resources, utilities, and
facilities and taking advantage of them as well, and yet some
states do not collect or capture any of this potential revenue
to redirect and disseminate throughout our state for other
beneficial purposes.
On-line purchasing with the utilization of
the internet has grown over the years with many consumers
and many states have little control or authority in capturing
any sales tax or revenue of any type as related to on-line
purchasing. Tobacco-less products are another unexplored area
in collecting sales tax for and in Pennsylvania, as well as,
pornography. Pennsylvania is one of the only states in the
entire country not collecting sales tax from both of these
industries regardless of whether policymakers agree philosophically
or not with their appropriateness in an ethical sense. They
both will continue to exist in the consumer’s market.
While it is recognized that there are rebates
to pay for purchasing environmentally hybrid vehicles, the
same should be considered in the event a consumer chooses
to purchase a four cylinder vehicle in comparison to a six
or eight cylinder vehicle….in which the higher tax should
be related to the higher cylinder of the vehicle.
Moving to a state system of collecting revenue
through a shift from property to sales tax can provide a yield
which varies from year to year. Policymakers should take advantage
of a strong economy and establish a rainy day reserve fund
specifically designated for education when in the event the
statewide economy trend was to soften. This reserve fund would
be utilized only for disbursement purposes to all 501 local
school systems statewide in an equitable manner and to be
utilized only when needed to account for economic trends.
In 2003-04 Pennsylvania school districts spent approximately
$18.6 billion. The State Department of Revenue estimates by
2007-08 when the proposed transition to total elimination
of property taxes is complete, estimated available revenues
to be $15.2 billion. Currently, Pennsylvania taxpayers annually
pay over $8.3 billion in school property taxes. Logic and
reasoning would suspect that the $3 billion dollar disparity
between spending and revenues would likely increase spending
over the course of 2003-08. In the event spending could not
be restrained, avoidance of this implication could be diminished
through a back end referendum clause removing a school district’s
ability to raise school property taxes at any future time
for personal property owners or homeowners. However, as with
previous plans, school boards could have the option to raise
local wage taxes to bring deeper cuts in property tax rates
as an option rather than a requirement or mandate through
legislation. Again, transitioning to a state system would
raise serious implications for allocations and disbursements
and would have to be accomplished in an equitable distribution
formula statewide to each and every 501 school districts,
rich or poor, to be fully effective and efficient in providing
sustainable funding to education in our schools.
In closing I have spoken to many diverse
people and groups across the state pertaining to property
tax reform and specifically about increasing or broadening
the impact of the state sales tax. Most people have shared
with me, as long as the legislature designates it specifically
for something such as earmarked for roads, bridges, education,
or special education….they have no problem with an increased
sales tax….because as consumers they are making choices
and those choices will be easier to make based on knowing
ahead of time where the extra revenue is going towards and
being directed towards.
Pennsylvania needs to capture revenue it
is missing on a daily basis and redirect those funds for a
specific earmarked fund for the benefit of the entire Commonwealth.
Kimberly D. Geyer
Mars Research & Retrieval Services
May 15, 2006
www.marsrrservices.com
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