August 4, 2009
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Temporary Taxes Are Rarely Temporary
By Senator Mike Folmer

Tem·po·rar·y – an adjective meaning lasting, used, serving, or enjoyed for a limited time. Derived from the Latin temporarius, from tempus, tempor-, time.  Synonyms include temporary, acting, ad interim, interim, provisional. Antonym is permanent. 

Governor Rendell continues to press for a temporary, 16 percent increase in the Personal Income Tax (PIT), which he argues is the state’s "best option" to balance the state budget. He says a PIT increase wouldn’t be as bad since roughly half of Pennsylvania households would not pay it. For the half that would end up footing the tax bill, the Governor says the increase would be "less than $5 per week."  

Milton Friedman said:  "Congress can raise taxes because it can persuade a sizable fraction of the populace that somebody else will pay." 

Although $5 may not seem a lot to the Governor, this "temporary tax" adds up to $20 a month, or $240 a year – money I am sure individuals would rather spend elsewhere.  

From a look at the definition, "permanent" is an antonym of "temporary;" that is exactly what has become of other "temporary" tax increases throughout Pennsylvania history.

The most famous (or infamous) temporary tax is the 1936 Johnstown Flood Tax.  Enacted as a 10 percent tax on liquor, the toll was set to expire May 31, 1937.  Over the years, the sunset date was extended numerous times until the tax was made permanent in 1951.  The current rate is 18 percent.

A year prior to the Johnstown Flood Tax, the Cigarette Tax was enacted as another emergency tax of 0.1 cent per cigarette. It became permanent in 1951, and the current rate is 6.75 cents per cigarette. 

Other "temporary" taxes include the Realty Transfer Tax - enacted in 1951 as a 1 percent temporary tax. The tax was made permanent in 1961 and the rate remains at 1 percent. 

The Corporate Net Income Tax (CNI) was first imposed in 1935 at a rate of 6 percent.  The rate "temporarily" was raised in 1977 to 10.5 percent, which was made permanent in 1982.  In 1991, the rate reached a high of 12.25 percent, and in 1995, lowered to its current rate of 9.9 percent.   

The Sales and Use Tax was enacted in 1953, and eventually evolved into support for public education.  The tax started at 1 percent and currently is at 6 percent. The initial 6 percent imposition was also to be temporary until 1969, however, later that year the 6 percent was made permanent. Philadelphia and Allegheny County impose another 1 percent on purchases in their jurisdictions. 

The Personal Income Tax (PIT) was imposed in 1971 at 2.3 percent.  Throughout the years, the rate has varied and some increases automatically sunsetted.  The PIT reached its current high in 2003 when Governor Rendell raised the rate to its current 3.07 percent. 

As you can see, temporary taxes are rarely temporary and higher taxes are simply no good for Pennsylvania’s future or economic recovery. We must get government spending under control and have additional choices other than raising taxes – even if only "temporary."