Morning Must Reads: Jobs, Budgets and Local Taxes

If you haven't heard by now, a temporary two-month extension of the federal payroll tax cut and emergency unemployment benefits passed by the U.S. Senate was scuttled by the U.S. House on Tuesday. With the failure to extend both measures expected to slow the already tepid pace of economic growth, it is hard to imagine the House will not reconsider its position in the 11 days remaining before the current extensions expire.

Pennsylvania Budget Secretary Charles Zogby gave a grim mid-year budget briefing on Tuesday that emphasized slower-than-expected economic growth as a key factor in slower-than-expected tax revenue growth. Sharon Ward of the Pennsylvania Budget and Policy Center fills in the budget details the Budget Secretary choose not to emphasize.

Secretary Zogby rightly identified areas of built-in growth that will contribute to a structural budget deficit moving forward.

His analysis failed to mention how much tax cuts, both enacted and planned, will contribute to the short- and long-term problem. For example, the administration has likely under-estimated the cost of the 100% bonus depreciation policy enacted in January, contributing to the lower-than-expected corporate tax collections. (This policy allowed corporate taxpayers in 2011 to deduct 100% of a capital expense up front, instead of stretching it out over a period of years.)

The Governor's budget guidance issued earlier this year called for $400 million more in tax cuts, which could contribute to more than half of the expected gap for 2012-13.

The combination of state budget cuts and the end of Recovery Act funding have also translated into a wave of layoffs and property tax increases throughout Pennsylvania. What follows are this morning's layoff and tax increase news:

It is reckless in this economic environment to pursue tax policies that reward narrow special interests and simultaneously generate additional state budget cuts. Economic conditions have already decimated local government tax collections. A new round of budget cuts required to finance tax cuts for big corporations will force local governments to pursue further rounds of both property tax increases and layoffs.

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