"My proposal lowers our sales tax rate by a third, increases the fairness of our business and sales tax systems and helps our state avoid the financial crisis that we know is only 18 months away," Governor Rendell said. "We will eliminate special interest exemptions on items except necessities like food, clothing and medications, and increase fairness because every item not subject to the sales tax makes the tax on everything else far too high."
The Governor’s proposal would reduce tax rates in Philadelphia from 8% to only 5.3%. The money generated by the tax change would be put into a Stimulus Transition Reserve Fund that could not be touched until July 2011 - after Governor Rendell's term of office will have ended - to help cover the estimated $2.3 billion budget gap that will result from the end of federal Recovery funding.
"A year from now, when more than $2 billion in Recovery Act funds are gone, I will no longer be Governor, but I can see it coming and I know if we take action today, we can avoid a budget crisis then. Taking the long view will save legislators from enacting huge tax increases that will be inevitable in the coming years.
"Elected officials and pundits who suggest further budget cuts to make up for the ending of federal aid would be jeopardizing the kinds of state investments that made community revitalization possible," Governor Rendell said, noting that residents would save nearly $500 in taxes on the average new car purchased in the suburbs and nearly $650 in Philadelphia.
"If we want our state to continue to invest in our cities, great communities, and industries, we need to take the bull by the horns and get in front of this crisis."
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