What Governor Rendell's Budget Really Means to Pennsylvania Consumers

State and Local Tax

By Jack Stewart

When commenting on his new budget proposal that was revealed last month, Governor Ed Rendell was quoted as saying, “For the average Pennsylvania family, the elimination of sales tax loopholes does not impact them one way or other.” Assuming the Governor is successful and his budget becomes law, let’s examine the possible impact on the average Pennsylvania family.

Did you buy a newspaper this morning? Under the Governor’s budget you will need to add 4% to the price. Okay, that’s not much, but what if you are going to meet with your accountant today to have your tax return prepared. Under Governor Rendell’s budget, it will cost you 4% more. Are you planning to use your tax refund as a down payment toward a new addition for your home? If you are going to use a bank to finance the difference, remember that financial institution fees will be taxed at 4%. Planning to have your lawyer review the finance agreement? Better plan for an additional 4% tax on your lawyer’s bill. You should also budget an extra 4% for the architect’s bill to design the addition, and another 4% for the engineer’s invoice to do the survey. In addition, you will have to budget for an additional 4% for the contractor to build the addition and another 4% for the shipping charge of the construction materials. Of course, you will want utilities hooked up to the addition, and with the combination of more housing space and a new 4% sales tax, your utility bills may literally go through the roof.

Do you commute to work? Whether you’re paying to park your car or take the bus, it will cost at least 4% more. Is your pet ill and need an expensive operation? Expect to see a 4% sales tax on your vet’s bill. Going to pick up your dry cleaning, some personal hygiene products or some non-prescription medications from the store on the way home? It will cost an additional 4%.

Finally, if you think you are going to get away from this tax in the afterlife, think again. If you want to be buried with your loved ones, add 4% to the cost of the vault and the casket. Not to mention another 4% for the funeral director’s services.

Of course, it is important to note that the Governor’s budget does reduce the state sales tax rate from 6% to 4%. However, with all the Governor’s additions to the tax base, the lower rate will not offset the massive tax increases that will impact the cost of living for all Pennsylvanians.

Schneider Downs provides accounting, tax, wealth management and business advisory services through innovative thought leaders who deliver the expertise to meet the individual needs of each client. Our offices are located in Pittsburgh, PA, and Columbus, OH.

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.

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