Senate Approves Tax Code Bill Without Taxes on Gas, Smokeless Tobacco

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October 6, 2009

The state Senate approved a 2009-10 revenue plan, House Bill 1531, by a 35-14 vote on Tuesday.

The tax code bill includes many of the revenue measures announced weeks ago and also adds a gross receipts tax on managed care organizations that have contracts to provide Medical Assistance services. The plan excludes prior proposals to enact a tax on small games of chance and to extend sales tax to live performances, arts venues and museums. It also excludes a House-backed plan to enact a severance tax on natural gas production and an excise tax on cigars and smokeless tobacco.

Read PBPC's letter to lawmakers supporting the natural gas and tobacco taxes.

The tax code plan approved by the Senate includes the following recurring revenue measures:

  • $528.5 million from a 5.9% gross receipts tax on managed care organizations for gross receipts received through contracts with the Department of Public Welfare for providing Medical Assistance services.
  • $300 million from business tax changes. They include temporarily freezing the Capital Stock and Franchise Tax at the 2008 rate for the next three years. The increased revenue is offset by further tax cuts for large businesses. On balance, this will raise $300 million in 2009-10 and $461 million in 2010-11. The tax cuts represent a permanent revenue loss in exchange for a temporary tax increase.
  • $171 million by redirecting to the General Fund 25 cents of the cigarette tax that was previously used to help offset doctors' malpractice premiums.
  • $97 million in 2009-10 and $145.5 million in 2010-11 from a 25-cent increase in the cigarette tax.
  • $16 million in 2009-10 and $25 million in 2010-11 from adding mini cigars - cigarette-sized cigars - to the state cigarette tax. These products fall under the federal cigarette tax.
  • $38 million in 2009-10 and $75 million in 2010-11 from reductions in tax credits.

The tax code bill also provides for the following one-time revenue measures:

  • $190 million in 2009-10 from a tax amnesty program.
  • $159 million from a one-time change in personal income tax withholding in 2009-10 and $217.5 million from a one-time change in sales tax collections in 2010-11.

Additionally, the tax code bill adds a sales tax exemption for helicopter sales and repairs, which will reduce revenues by $70,000 in 2009-10 and $90,000 in 2010-11.

Click here for a document released by the Senate Appropriations Committee on the revenue measures in the Senate-amended House Bill 1531.

While not included in the tax code bill, the following revenue measures are also part of the broader plan to fund the 2009-10 state budget approved by the Senate:

  • $200 million in 2009-10 from the introduction of table games in casinos.  Most of this first-year revenue is for licenses; the revenue declines to $121 million in 2010-11.
  • $65 million in leases from drilling on state park lands in the Marcellus Shale.
  • Transfers of $755 million in the Rainy Day Fund and $708 million in the Health Care Provider Retention Account to the General Fund.
  • Transfers of $143 million from the Oil and Gas Lease Fund and $150 million from the Tobacco Settlement Endowment Fund to the General Fund.
  • Transfer of $45 million from existing traffic fines to the General Fund.