Sales tax expansion hinders state revenue growth

In the latest round of budget negotiations, legislators are debating the option to expand the sales and use tax base to include professional services. This ill-conceived idea would place Pennsylvania at a competitive disadvantage if adopted, and unfairly penalize taxpayers who are working to comply with the state’s complicated and unwieldy tax code.

The legislation would increase the personal income tax rate from 3.07 percent to 4.34 percent, increase the sales and use tax rate from 6 percent to 7 percent, and expand the sales and use tax base to many goods and services currently not subject to tax. According to a report issued by the non-partisan Independent Fiscal Office, the proposal would result in a negative net effect on school district funding.

The PICPA has testified on many occasions supporting tax simplification. All agree that the current code is complicated and convoluted. Individuals depend on accounting services to comply with both state and federal tax laws. It is unfair to tax services necessary to comply with current tax laws. In essence, it is double taxation strictly for the purpose of compliance.

I recognize that it is critical to look for ways to create additional state revenue. Placing our service sector at a competitive disadvantage is not the answer, and placing Pennsylvanians in a position to pay to comply is certainly an undue burden. I encourage legislators to review the Guiding Principles of Good Tax Policy, which clearly illustrates the 10 fundamental principles, before voting this ill-conceived tax scheme.