OPINION: How to Balance Pennsylvania’s Budget

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PETER J. WIRS

BY PETER J. WIRS
Pennsylvania has had a balanced budget for two years now. The problem: our governor and legislators don’t know it.

As one of three legislative mediators requested by a Senate GOP leader to bridge the gap, not only can I say that the budget is balanced, by enacting remedial legislation, but once we get past the heuristics, Gov. Tom Wolf and his GOP counterparts can reach agreement within two hours.

Everyone knows the two reasons behind our fiscal woes: the approximately $3 billion Structural Budget Deficit and the $45 billion Unfunded Pension Liabilities. We solve the former by collecting taxes already on the books, the latter by restoring the common-law authority to escheat (liquidate) abandoned property into proceeds to replenish state and local pension funds.

Harrisburg forfeits approximately $1 billion in personal income taxes from nonresidents because it can’t read US Supreme Court decisions. In 1967, the Supreme Court held that states cannot collect sales and use taxes from nonresidents unless those residents have a physical presence in the state. Harrisburg incorrectly applies this “physical presence” rule to all taxes, making Pennsylvania an outlier among all states that routinely collect income taxes from nonresidents.

This lack of logic persists even after the Supreme Court reiterated not once, but twice in Quill v. North Dakota (1992), the “physical presence” rule never applied to personal income taxes. Thus, collecting personal income taxes from nonresidents – the law has been on the books for 46 years – solves the structural budget deficit.

The $45 billion Unfunded Pension Liability crisis is solved by restoring the commonwealth’s ancient police powers to escheat real property. We kill two birds with one stone by rehabilitating seizable abandoned property (last estimated by the US Census at $84 billion in market value), which burdens state and municipal services (at an annual cost of $6.5 billion), so that new owners can contribute property- and income-tax revenue.

Why aren’t we collecting taxes already due? One strategic and one institutional barrier prevent Pennsylvania from balancing its budget. The debate should not be how to slice up a dwindling pie of government revenue, but how to steer investment into expanding the pie.

The strategic barrier is the “gatekeepers.” While both officeholders and their assistants want to serve the public’s best interest, they each have different incentives. The former wants to be re-elected. But a shrewd senior staff member or attorney wants to corral backroom influence to exert control over work for both the Democratic governor and the GOP leaders. Gatekeepers like these tend to hoard policy initiatives for possible future use; they only have clout enough to lead a couple of legislative charges a year (especially when they are Democrats in opposition).

The institutional barrier is “pressure of the immediate.” Legislators spend inordinate time traveling to the Capitol, attending endless meetings, plowing through phone calls, emails and snail mail, interrupted by daily requirements to eat and sleep. Public servants contend with ever-increasing ministerial demands and dwindling time to actually legislate. They’re so busy swatting away the alligators that they have no time to drain the swamp.

The charitable trust that funded the mediation team sought to resolve both barriers through court intervention. But the Supreme Court demurred out of respect to separation of powers, and a Commonwealth Court suit was withdrawn with assurances of reform.

With time running out, the mediators need your support to empower the Democratic governor and the Republican-led General Assembly to override their gatekeepers and prioritize serious structural reform.

If the budget can be readily balanced without raising a single tax percentage, then all taxpayers must move our leaders to overcome the strategic and institutional barriers before June 30.

It’s time for elected officeholders to acknowledge the maxim: You can’t keep doing the same thing over and over while anticipating a different result. Balancing the budget is not only constitutionally mandated, but readily accomplished – today.

Peter J. Wirs is trustee of the Lincoln Charitable Trust at trustee.LincolnCharitable.org.

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