Temporary Taxes Are Rarely Temporary
20. Aug, 2009 
5 Comments
by State Sen. Mike Folmer (PA-48)
Tem·po·rar·y – an adjective meaning lasting, used, serving, or enjoyed for a limited time. Derived from the Latin tempora rius, from tempus, tempor-, time. Synonyms include temporary, acting, ad interim, interim, provisional. Antonym is permanent.
Governor Rendell continues to press for a temporary, 16 percent increase in the Personal Income Tax (PIT), which he argues is the state’s “best option” to balance the state budget.
He says a PIT increase wouldn’t be as bad since roughly half of Pennsylvania households would not pay it. For the half that would end up footing the tax bill, the Governor says the increase would be “less than $5 per week.”
Milton Friedman said: “Congress can raise taxes because it can persuade a sizable fraction of the populace that somebody else will pay.”
Although $5 may not seem a lot to the Governor, this “temporary tax” adds up to $20 a month, or $240 a year – money I am sure individuals would rather spend elsewhere.
From a look at the definition, “permanent” is an antonym of “temporary;” that is exactly what has become of other “temporary” tax increases throughout Pennsylvania history.
The most famous (or infamous) temporary tax is the 1936 Johnstown Flood Tax. Enacted as a 10 percent tax on liquor, the toll was set to expire May 31, 1937. Over the years, the sunset date was extended numerous times until the tax was made permanent in 1951. The current rate is 18 percent.
A year prior to the Johnstown Flood Tax, the Cigarette Tax was enacted as another emergency tax of 0.1 cent per cigarette. It became permanent in 1951, and the current rate is 6.75 cents per cigarette.
Other “temporary” taxes include the Realty Transfer Tax – enacted in 1951 as a 1 percent temporary tax. The tax was made permanent in 1961 and the rate remains at 1 percent.
The Corporate Net Income Tax (CNI) was first imposed in 1935 at a rate of 6 percent. The rate “temporarily” was raised in 1977 to 10.5 percent, which was made permanent in 1982. In 1991, the rate reached a high of 12.25 percent, and in 1995, lowered to its current rate of 9.9 percent.
The Sales and Use Tax was enacted in 1953, and eventually evolved into support for public education. The tax started at 1 percent and currently is at 6 percent. The initial 6 percent imposition was also to be temporary until 1969, however, later that year the 6 percent was made permanent. Philadelphia and Allegheny County impose another 1 percent on purchases in their jurisdictions.
The Personal Income Tax (PIT) was imposed in 1971 at 2.3 percent. Throughout the years, the rate has varied and some increases automatically sunsetted. The PIT reached its current high in 2003 when Governor Rendell raised the rate to its current 3.07 percent.
As you can see, temporary taxes are rarely temporary and higher taxes are simply no good for Pennsylvania’s future or economic recovery. We must get government spending under control and have additional choices other than raising taxes – even if only “temporary.”
Mike Folmer [send him email] of Lebanon, Pennsylvania is a Pennsylvania State Senator who represents the 48th Senate district, which includes all of Lebanon County and portions of Berks, Chester, Dauphin and Lancaster Counties.
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I seem to recall reading something on a temporary tax on telephones that congress passed to cover the Spanish- American war, considered a “luxury”….. it lasted over a hundred years.
Folmer, you are right, and I am glad you wrote this article. Basic human nature prevents most people, including politicians, from being able to deal with the concept of a temporary budget.
The more money they have, the more they spend. The more they spend, the more they need to make. The more they need to make, the higher the tax needs to be.
Many people are having to shed excess. Many are losing their homes. Their incomes are not sufficient to pay the bills, so they start shedding things – like it or not.
Government works differently, unfortunately. They might shed a little excess, but not much. They do not feel the real pain and threat, like normal people. Taxes are a magic wand. Decree you want more money, and poof! It appears.
You also have the credit to issue bonds, which is another big problem in itself. 2 or 3 years ago, our school district put forth a proposal to issue $900 million in bonds. I read the proposal. The pro forma had a built-in assumption that real estate values (our way of funding schools) will always go up. So, indirectly, the assumption was that taxes will always go up.
Here’s the kicker. Real estate has stagnated and/or gone done (Texas has been lucky). So, we have to wait and wonder when they will increase the tax RATE, because we know that “tax creep” (increases in values of land being taxed) is not going to happen. We also know that bonds are long term (temporary or not).
So, the point is, whenever and however you put more money in the hands of government, it will become a new need. Best never to taste the OPM (other people’s money), because it is highly addictive.
Highly addictive might even be an understatement! Well, either way, you’re right on the “money” here Jeff….
It’s not just taxes that are temporary with government. It’s “extraordinary” measures like spying on us during “war” They always find a way to keep every program they implement under an “emergency”
Will people ever get sick of this whole game?
Another example, Federal Individual income tax withholding was supposed to be a temporary measure to shore up the nation in time of war. Last time I checked that one was still going on too…