HARRISBURG — An evolving proposal to fill Pennsylvania’s $2.2 billion projected deficit hit so much opposition over extending the sales tax to business-to-business storage and warehousing that it sent lawmakers scrambling to find a substitute Tuesday, amid a stubborn budget stalemate.
Both the House and Senate were in session Tuesday with the expectation of taking preliminary votes on a days-old revenue package assembled after Democrats couldn’t overcome opposition by House GOP majority leaders last week to imposing a new tax on Marcellus Shale natural gas production.
However, as of Tuesday afternoon, no budget-related votes were scheduled, and Senate Republicans said House Republicans were raising the possibility of a 5 percent statewide hotel tax — on top of the existing 6 percent state tax on hotel reservations — to replace the warehousing tax in a budget package.
House Majority Leader Dave Reed, R-Indiana, declined to comment, saying numerous options were under discussion.
The Pennsylvania Restaurant and Lodging Association sent a letter to legislators Tuesday afternoon addressing the rumor of a hotel tax increase, and urging against it. At 11 percent, the new tax rate would be the highest lodging-specific tax in the nation, the PRLA said.
Rep. Stephen Bloom (R-Carlisle) said he opposed the warehousing and hotel tax ideas.
The proposed package is the latest stage of discussions since lawmakers overwhelmingly approved a $32 billion budget bill June 30, about a 3 percent increase, without any agreement on how to fund it.
But a growing number of businesses — including Amazon — and blue-collar labor unions have contacted lawmakers, asking them to oppose a tax that some worry could chill the state’s growing warehousing and distribution industry as well as operations at ports, airports and oil and gas refineries.
“I believe it would affect the entire state’s commerce,” said Rep. Ed Neilson, D-Philadelphia.
Locally, the Cumberland Area Economic Development Corp., the county-sponsored nonprofit agency, also urged caution against a warehousing tax. In a letter to legislators, CAEDC CEO Jonathan Bowser said transportation and warehousing account for 12.5 percent of Cumberland County’s jobs, and the sector continues to post strong growth and drive the county’s low unemployment.
The proposal “would be a tax placed squarely on one of the top economic engines of the Cumberland Valley,” Bowser wrote.
The commercial storage tax is a relatively small piece — an estimated $100 million in a partial year — of an overall revenue package negotiated behind closed doors by Democratic Gov. Tom Wolf’s office and leaders of the Republican-controlled Legislature. It would be tucked into hundreds of pages of budget-related legislation that remains under wraps and negotiated in secret, awaiting action.
With a stalemate now three months old, Wolf had to postpone payments to school districts and Medicaid insurers for lack of revenue flowing into the state’s bank account, while a downgrade by Standard and Poor’s lowered Pennsylvania into the bottom five states it rates.
The revenue package otherwise leans heavily on borrowing, one-time fund transfers and authorizing 10 more casinos around Pennsylvania.
Borrowing would provide the biggest piece of the puzzle, nearly $1.3 billion. The total cost, interest included, could exceed $2 billion over 20 years. Another $500 million could come from off-budget programs that provide everything from medical malpractice insurance to funding for mass transit agencies and environmental cleanups.
It also would expand the availability of casino gambling in Pennsylvania, already the nation’s No. 2 commercial casino state, in a bid to draw millions more dollars in license fees from casino owners and taxes on gambling losses.
The state’s licensed casinos could bid on up to 10 licenses to operate a smaller casino with hundreds of slot machines and table games in an area that is far enough away from existing casinos, lawmakers said.
Meanwhile, casinos could pay millions of dollars for a license to open an online portal for people in Pennsylvania to gamble on casino-style games on the internet, while truck stops that meet certain conditions could install slot machine-style terminals.
The deal under discussion also includes a sweetener for supermarkets and groceries that sell beer or wine: removing a requirement that they maintain separate cash register for alcohol purchases.