A RADical bail-out?

By Dave Anderson:

The following post is a very wonky, very Pennsylvania focused piece on tax policy.  Be warned before I geek out too much.

Okay....

As I mentioned earlier this week, Governor Rendell wants to expand the base of goods and services that are taxed by the state sales tax while reducing the sales tax rate from 6% to 4%.  The expanded base would include the currently non-taxed services of professionals, attorneys and accountants as well as a hodge-podge of goods including helicopters, bullion, trout and caskets.  The proposal would raise state revenue because the new tax base is more than 150% and back of the envelope 175% of the current state sales tax base. 

My wife made an excellent point at dinner; the state sales tax rate would decrease by 33% but the local, Allegheny Regional Asset District (RAD), sales tax rate would stay the same.  Currently the RAD 1% sales tax is applied to all purchases in Allegheny County that are subject to the state sales tax.  If there is no change in the law regarding the application of RAD we should expect a significant revenue windfall for RAD.  The same logic applies for the Philadelphia taxing district as they add a 2% sales tax to all goods and services subject to the Pennsylvania state sales tax. 

RAD collects the revenue from the 1% Allegheny County sales tax, and distributes it to a wide variety of entities.  Half of the revenue is distributed to county and municipal governments within the county.  The other half of the revenue is used to support local cultural and recreational amenities such as the regional and city library systems, the major parks, theaters, museums and the debt payments for the North Shore stadiums.    

Expanding the sales tax base that the 1% RAD tax applies to would lead to a massive pool of new money available for broke local governments. 

If the same funding formula is used and the expanded base is RAD taxable, we are looking at an extra $40 million or more per year for local amenities and the same amount for local governments.  These new funding streams would dramatically reduce local financing fights such as the recent Carnegie Library of Pittsburgh funding cuts as RAD would suddenly be able to fully fund the library system in the city of Pittsburgh.  It would also give the City and the County a new cushion to soften the blow of a casino bankruptcy. 

If these assumptions are correct, is the sales tax expansion an attempt to give Allegheny and Philadelphia county significantly new revenue streams without the dreaded specter of being accused of raising new taxes?  Is RAD the means through which Allegheny County and its component units are bailed out with new cash flows?