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Philly schools to get $120 million from permanent extension of temporary sales tax

By   /   July 1, 2013  /   No Comments

By Eric Boehm | PA Independent

HARRISBURG – It has been said there is nothing as permanent as a temporary tax.

The Pennsylvania General Assembly proved that idiom true on Monday night.

THE 1 PERCENT: Philadelphia will get to keep charging an extra 1 percent sales tax, thanks to the state General Assembly.

THE 1 PERCENT: Philadelphia will get to keep charging an extra 1 percent sales tax, thanks to the state General Assembly.

The state House voted 119-83 to extend indefinitely a 1 percent local sales tax for Philadelphia, which was enacted in 2009 and was scheduled to be phased out at the end of 2013. The revenue will be used to give $120 million annually to schools in the city.

The permanent extension of the sales tax, which is counted on top of a 6 percent state sales tax and an additional 1 percent city sales tax, was included in the state tax code bill, a kind of instruction manual that moves along with the state budget bill. The bill goes to the state Senate for a final vote that could come on Tuesday.

The bill also included a proposal to close the so-called “Delaware loophole” by giving the state Department of Revenue greater leeway to audit companies believed to be moving revenues across state lines in order to reduce their tax bill.

“For years, we have heard about the need to close the Delaware loophole and today we can finally say that we have reached that goal,” said state Rep. Dave Reed, R-Indiana, who led the charge on the Delaware loophole issue in the House.

It also continued the phase-out of the Capital Stock and Franchise Tax, which is paid by businesses on their physical assets. The tax will generate an estimated $58 million for the state next year.

That tax was supposed to be eliminated on Jan. 1 2014, but Gov. Tom Corbett agreed to extend the phase-out for another two years in order to general more cash for Pennsylvania’s underfunded public pensions. The tax is now scheduled to sunset on Jan. 1, 2016.

In a separate bill, the state House voted 104-98 to give $45 million to Philadelphia schools to be paid for with a federal grant program.

Boehm can be reached at Eric@PAIndendent.com and follow @PAIndependent on Twitter.

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Eric is a reporter for Watchdog.org and former bureau chief for Pennsylvania Independent. He lives in Minneapolis, Minnesota, where he enjoys great weather and low taxes while writing about state governments, pensions, labor issues and economic/civil liberty. Previously, he worked for more than three years in Harrisburg, Pennsylvania, covering Pennsylvania state politics and occasionally sneaking across the border to Delaware to buy six-packs of beer. He has also lived (in order of desirability) in Brussels, Belgium, Pennsburg, Pa., Fairfield, Conn., and Rochester, N.Y. His work has appeared in Reason Magazine, National Review Online, The Freeman Magazine, The Philadelphia Inquirer, The Washington Examiner and elsewhere. He received a bachelor's degree from Fairfield University in 2009, but he refuses to hang on his wall until his student loans are fully paid off sometime in the mid-2020s. When he steps away from the computer, he enjoys drinking craft beers in classy bars, cheering for an eclectic mix of favorite sports teams (mostly based in Philadelphia) and traveling to new places.