The House Democratic Caucus on Thursday backed out of a budget deal struck nearly two weeks ago by its leadership, removing two taxes – one on small games of chance and another on cultural events – that rank-and-file lawmakers refused to support.
In exchange, the caucus announced during an early evening Rules Committee meeting that they now support a severance tax on natural gas drilling and a new levy on tobacco products, including previously untaxed smokeless tobacco. The two new provisions raise about the same amount as the taxes they replace, and the total spend level for the budget remains at $27.945 billion.
The alterations throw budget negotiations, which appeared finished just days ago, into disarray. Senate Majority Leader Dominic Pileggi (R-Delaware) has said repeatedly taxes on smokeless tobacco and natural gas extraction are non-starters for his members.
Senator Pileggi, who met with reporters hours before Democrats announced their new budget, said at the time if the House changes the budget deal, “I think we’re back to square one.â€
Democrats moved their new budget bill, House Bill 1531, out of committee on a party-line vote, and they expect a vote for it on the House Floor on Friday.
House Majority Leader Todd Eachus (D-Luzerne) said afterward he agreed to change the deal in caucus because otherwise it wouldn’t receive the 102 votes necessary for approval.
“Democratic values must be expressed to garner Democratic votes,†he said, adding that taxes on small games of chance and cultural events were “complete non-starters†with his members.
Western Pennsylvania lawmakers like Rep. Nick Kotik (D-Allegheny), vigorously opposed the small games tax. Opposition to the arts tax originated from the southeast, with lawmakers like Rep. Josh Shapiro (D-Montgomery).
Majority Leader Eachus said he’s “hopeful†the deal between the caucuses isn’t off.
“I understand what the agreement was, but agreements change,†Rep. Eachus said.
Democrats estimate their new budget is about 80 percent similar to the budget agreement.
Also included in the Democrats’ announcement were details about the proposal for another pillar of the budget agreement: table games. Under their version, categories one and two casinos will have to pay a $20 million fee for table games licenses and a 34 percent tax – a rate higher than lawmakers had previously discussed. Previous iterations of table games proposals included ranges of 12-21% in taxation and $10-15 million in fees. Category three casinos will pay a $7.5 million fee.
The proposed tax tobacco tax, which includes smokeless tobacco and cigars, would force retailers to pay a 30 percent fee when buying the products. The budget would also have an across-the-board 33 percent reduction of all tax credits, while preserving the original proposal to lease additional land for Marcellus Shale drilling.
The proposal also calls for sales tax collection to be accelerated this fiscal year, and personal income tax collection to be accelerated the next. A sales exemption for helicopters and helicopter parts was also eliminated.
Other provisions in the Democrats’ budget are the same as those included in the agreement.
House Minority Leader Sam Smith (R-Jefferson) took aim at the new tax proposals during the committee meeting. The Marcellus Shale tax “sends a bad message†to an industry that could revitalize much of rural Pennsylvania, he said, and the tobacco tax hurts “blue-collar†families.
“House Republicans will stand firm with the people of Pennsylvania and not increase taxes,†Rep. Smith said.
Smith’s caucus has continued to promote its roughly $27.5 billion budget proposal, which does not include any new taxes. They will likely continue to push that plan while the state of negotiations appears uncertain.
