Pennsylvania's Democratic Gov Catches Sales Tax Cut Fever: Seeks 2-Cent Slash, Sees Boost In Retail Sales

CINCINNATI (TDB) -- A 4 percent statewide sales tax is Gov. Ed Rendell's goal. He is living proof there are Democrats who believe that cutting taxes stokes the economy. Skeptical Ohioans need look no further than next door in Pennsylvania. Currently, that state's sales tax is 6 percent. Rendell said his plan "will mean that Pennsylvania's sales tax rate will be lower than the rates of Ohio and West Virginia." His move comes while there's been talk in Cincinnati of raising Hamilton County's sales tax rate by half a cent -- to 7 cents on a dollar -- to chip away at stadium debts. But Rendell is headed in another direction. He is pushing for the huge sales tax rollback to "boost retail sales and help close future state budget gaps." Rendell once was chairman of the Democratic National Committee. Now he sounds like a Republican. Rendell outlined his plan to a group of suburban Pittsburgh business leaders today:

"My proposal lowers the sales tax, eliminates special interest exemptions on items except necessities like food, clothing and medications, and increases fairness because every item not subject to the sales tax makes the tax on everything else far too high."

He wants to stash revenue generated by the proposed sales tax reduction in a Stimulus Transition Reserve Fund. The fund would be frozen until July 2011 to help cover an estimated $2.3 billion Pennsylvania budget gap expected from the end of federal recovery funding. Some think Rendell has a bait and switch plan. By eliminating some loopholes, he actually brings in more money. But the governor contends his tax cut will stimulate sales.

Pennsylvania's sales tax was adopted in 1953. The original tax applied to nearly all tangible goods. Since that time, 74 categories of goods and services have been exempted. Rendell contends the elimination of sales tax loopholes does not impact average families. Rendell is nearing the end of his second term. He was DNC chairman in 2000, and served as Philadelphia's mayor. His biography is available here.