State Net Capitol Journal – August 11, 2014; Pennsylvania House Cancels Vote On Cigarette Tax

Budget & Taxes

PA HOUSE CANCELS VOTE ON CIGARETTE TAX: The prospects for a cigarette tax bill providing emergency funding for Philadelphia schools were thrown into limbo last month when Republicans who control the state's Senate made some last minute changes to the measure (see PHILADELPHIA CIGARETTE TAX IN LIMBO in the July 21 issue of SNCJ). And those prospects took another downward turn last week when House Republican leaders canceled a vote on the bill (HB 1177), citing a lack of consensus on it.

The House is scheduled to reconvene in mid-September, when it could reconsider the issue. And Rep. Mike Vereb (R), for one, is optimistic a bill will ultimately be passed.

"We'll take that time to meet with members face-to-face for the next month and see what their issues were, try to turn them to 'yes' votes, and I'm very confident with more time on our hands, and the money to open the schools being fronted, that the pressure will be off in terms of trying to force people to vote, and then just try to educate them and encourage them to vote for this legislation," he said in a radio interview.

But in the meantime, House leaders have asked Gov. Tom Corbett (R) to advance enough money to allow Philadelphia's schools to open on time in September. Corbett is willing to do so, according to a spokesman for the governor.

"This is about putting children of Philadelphia first," said spokesman Jay Pagni. "The governor is prepared, if need be, to advance funding once the final request is made of him."

It's unclear, however, whether that move would actually avert the 1,000-plus school employee layoffs and delayed start for 130,000-plus students some Philadelphia officials have predicted. What does seem clear is that an advance on school funding would not be a permanent fix for the city's struggling school district.

"The problem with this is, it's not new money," said Mark McDonald, a spokesman for Philadelphia Mayor Michael Nutter. "What the School District needs is new additional funds." (PHILADELPHIA INQUIRER)

STATES EYE CONGRESSIONAL ACTION ON INTERNET TAX FREEDOM: The federal law banning states and local governments from imposing taxes on Internet access — first enacted in 1998 and renewed three times since — is set to expire on Nov. 1. Because the Internet Tax Freedom Act's expiration date is just days before the midterm elections, it's likely Congress will extend the moratorium. But the potential form that extension could take has many state and local officials on edge.

Last month, the U.S. House approved HR 3086, which would make the ban on Internet access taxes permanent and also require the seven states grandfathered in under the law over the years — Hawaii, New Mexico, North Dakota, Ohio, South Dakota, Texas and Wisconsin — to stop collecting those taxes. The seven states and their local governments would lose about $500 million in revenues each year as a result. But such a ban could also impact many other states, with more and more consumers switching from landline telephones and cable television, which many states tax, to Internet-based services like VoIP and broadband.

"We are losing taxes as we speak and Congress is not being sensitive to that," said assistant executive director of the U.S. Conference of Mayors, Larry Jones. "What it does is close the doors for us from being able to get any revenues from anything having to do with broadband." (STATELINE.ORG)

MO VOTERS SAY NO TO SALES TAX HIKE: Missouri voters rejected a sales tax increase last Tuesday that would have provided billions of dollars to repair the state's transportation infrastructure.

After years of working on the issue, lawmakers finally passed a proposed constitutional amendment this year that, if approved by voters, would have frozen the state's gas tax, imposed a moratorium on new toll roads and boosted the sales tax by three-quarters of a cent for 10 years. But Amendment 7 was broadly criticized for shifting the method of transportation funding away from fuel taxes and vehicle fees to the sales tax, which is more burdensome for the poor. And the measure was defeated by a sizeable margin, 59.2 percent to 40.8 in unofficial results.

"It's difficult to pass a tax increase in Missouri," said Terry Ganey, spokesman for Missourians for Better Transportation Solutions, a group that opposed the measure. "It's impossible to pass an unfair tax increase in Missouri." (KANSAS CITY STAR)

BUDGETS IN BRIEF: CALIFORNIA's new $152.3 billion state budget — 8.6 percent larger than last year's — significantly boosts spending for education and includes a 32-year plan to fully fund the teachers' pension system (REUTERS). • Twelve of ILLINOIS' historic sites and memorials, including Lincoln's Tomb in Springfield, will be closed extra days each week or be open fewer hours earlier in the year than normal to cut costs (CHICAGO TRIBUNE). • Two San Diego, CALIFORNIA-based companies that provide 1,450 jobs — software maker Active Network and fleet management company Omnitracs — will receive nearly $14 million in incentives to relocate to Dallas, TEXAS (DALLAS MORNING NEWS). • Digital Domain Media Group, the FLORIDA visual effects firm that resurrected deceased musician Tupac Shakur at CALIFORNIA's Coachella Music Festival in 2012, filed for bankruptcy six months later, saddling Sunshine State taxpayers with $37 million in debt that continues to live on (BLOOMBERG). • Last week, Standard & Poor's became the second bond rating agency to downgrade KANSAS' credit rating due in part to budget pressures imposed by the major income tax cuts enacted by the state. Moody's Investors Service took similar action in May (KANSAS CITY STAR).

- Compiled by KOREY CLARK

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