HARRISBURG House OKs increase in income tax

Rendell had sought a 34 percent rate increase in his original proposal.
HARRISBURG (AP) -- After spending most of Monday in closed meetings, members of the state House of Representatives voted 104-95 early today to raise the state's income tax to help boost education funding and close a budget deficit.
The plan to provide money for a portion of Gov. Ed Rendell's education initiatives hinges on raising the 2.8 percent personal income tax for the first time since 1991. The tax would rise to 3.25 percent Jan. 1, a 16 percent increase, and then roll back to a permanent 3.1 percent, an 11 percent increase, July 1.
The increase would produce an estimated $600 million in the first six months and $750 million annually after it lowers to 3.1 percent. Rendell had sought a 34 percent rate increase in his original proposal in March.
"This is a pared-down version of the governor's tax plan, and it's something that some of us have decided was the way to resolve our education problems. We feel that it was a reasonable compromise," said House Majority Leader Sam Smith, R-Jefferson.
What's in package
The measure was included in a package of three bills passed by the House that also would set aside the revenue for specific education programs, restore money cut from drug and alcohol programs and mass transit, and require school districts to ask voters to approve a moderate increase in local income taxes in exchange for receiving revenue from slot-machine gambling to offset property taxes that typically finance local education costs.
The Legislature has yet to send to Rendell a bill that would legalize slot machines in Pennsylvania.
Democrats had been expected to supply the majority of the votes for the tax increase -- Republicans accounted for about one-fourth of the "yes" votes -- and conservative House Republicans said it was wrong to seek a tax increase while the economy was still struggling.
Democrats argued that the personal tax increase, supplemented by higher taxes on cell phones and interstate calls and higher fees, would help improve education and spur economic development.
The tax revenue would boost basic education subsidies to the state's 501 school districts by an average of 3 percent. Special education funding would increase by 4.5 percent.
Block grants for schools
The plan also would set aside $200 million for block grants that schools could use as they see fit to comply with new federal mandates to improve standardized test scores. Another $34 million would be used for tutoring programs and $15 million would go to expand the federal Head Start preschool programs for needy children.
The partisan stalemate over how to cover the deficit as well as a significant increase in education spending has dragged on for months, leaving Pennsylvania as the only state in the nation without a completed budget for the current fiscal year.
Rendell has held up more than $4 billion in public education subsidies to pressure the Republican-controlled Legislature to consider his education plans, which include reducing class sizes though third grade and providing full-day kindergarten.
As a result, districts did not receive their first installment of state aid, which was due at the end of August; a second payment is due Oct. 30.
Senate aides in both parties said that any proposal passed by the House will be subject to further revisions.