HARRISBURG Talks will aim to cut tax increase proposal

The House passed the income-tax-increase plan Tuesday.
HARRISBURG (AP) -- Senate leaders are starting to discuss ways to whittle down a proposed increase in Pennsylvania's personal income tax that would help raise more than $1 billion to boost education funding as well as closing a deficit and restoring budget cuts made by Gov. Ed Rendell.
The increase, forged in negotiations between Rendell and leaders of the state House of Representatives, would raise Pennsylvania's income tax for the first time since 1991. The bill passed 104-95 early Tuesday with Democrats supplying three-fourths of the votes.
Room to negotiate
Although the proposal to permanently raise the income tax by 11 percent from 2.8 percent to 3.1 percent represents a smaller rate increase than the governor originally sought in March, Senate Democratic and Republican leaders agreed that there was still room to negotiate an even lower rate.
The legislation calls for increasing the income tax Jan. 1 to 3.25 percent -- a 16 percent rate increase -- and then rolling back the rate to 3.1 percent July 1. Sen. Vincent Fumo, the ranking Democrat on the Senate Appropriations Committee, said imposing a higher initial tax rate was excessive.
"I don't buy into the theory of a backloaded trigger that goes down. We don't need to take a big hit," Fumo said.
Estimated revenue
The increase would produce an estimated $600 million in the first six months and $750 million annually at the lower rate. Along with raising other taxes and fees, and allocating $450 million in federal budget aid, the package is worth about $1.6 billion this year, House Democrats say.
The partisan stalemate over how to cover the deficit as well as a significant increase in education spending has dragged on for months, with many contending that it is wrong to seek a tax increase while the economy is still struggling. The dispute has left Pennsylvania as the only state in the nation without a completed budget for the current fiscal year.
Three bills
The measure was included in a package of three bills passed by the House that also would set aside $450 million for new education programs and restore about $500 million cut from drug and alcohol programs and mass transit. Senate Minority Leader Robert J. Mellow, D-Lackawanna, said he would like to see additional funding restorations in any final agreement.
The bills also satisfied Rendell's demand that schools receive new money for tutoring and early childhood education. To pressure the Republican-controlled Legislature to consider those plans, Rendell has held up more than $4 billion in public education subsidies, forcing districts to go without state aid thus far.
Those education dollars, plus about $200 million in grants that schools could put toward Rendell's initiatives, were passed in the package.
The package also would 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.