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The First Rule of Budget Holes: Stop Digging

The First Rule of Budget Holes: Stop Digging

In a familiar storyline, Pennsylvania lawmakers are seeking to close a budget gap of some $3.2 billion by—you guessed it—raising taxes. To that end, Governor Ed Rendell has called for a “modest” hike of 16 percent in the state income tax rate from 3.07 to 3.57 percent for the next three years. Similar “temporary” tax hikes, implemented in 1983 and 1991, have yet to be fully repealed.

A Flat Debate on the Flat Tax

A Flat Debate on the Flat Tax

In comments to the Sacramento Bee late last week, Governor Arnold Schwarzenegger magnanimously agreed to consider a proposal to maybe discuss a flat tax rate on income in California. Much like similarly surprising talk of ending marijuana prohibition, the news makes for great headlines, but taxpayers should avoid any real optimism for the time being.While Schwarzenegger cleverly pays lip service to what some consider the holy grail of tax code reform, at a suggested flat rate of 15 percent, he has actually proposed a massive tax increase. Currently, even the wealthiest Californians pay “only” 9.3 percent. In the seven states where a flat tax is already in effect, the average rate is just 4.1 percent.