Rendell abandons push for sales tax hike

HARRISBURG - Gov. Rendell announced this morning that he is abandoning his push to raise the state sales tax, crediting a "soaring" Pennsylvania economy for producing more than $500 million in unanticipated revenue.

Through mid-June – two weeks shy of a complete fiscal year – Harrisburg has taken in $502 million more in revenue than first projected, negating, for now, the need to increase Pennsylvania's 6 percent sales tax by 1 percentage point, Rendell said at a Capitol news conference.

"It's unnecessary due to the terrific Pennsylvania economy," Rendell said. ". . .We are in good shape."

In his February budget address, Rendell proposed raising the sales tax and using the estimated $1 billion in new revenue to balance his spending plan for the coming fiscal year and provide expanded property tax relief.

Earlier this month, Rendell shifted his plan, saying the booming economy meant that all of the new dollars from a sales tax increase would be used to reduce property taxes. And, as of Friday, Rendell aides were suggesting that the governor was still advocating that idea.

Rendell said today that he plans to continue pushing for property tax relief but that it would have to wait until after the summer legislative recess. He said he hopes to revisit the idea by the end of the year.

The reversal comes amid intense budget talks between the administration and legislative leaders as they work on a compromise spending plan for fiscal 2007-2008, which starts July 1.

"Passage of a budget with no tax increases should be, by far, our top priority," said Erik Arneson, a spokesman for Senate Majority Leader Dominic Pileggi (R., Delaware). "Anything that brings us closer to that goal is welcome news."