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Loopholes on the chopping block

November 29, 2005

The Harrisburg Bureau of The Associated Press (AP) this week reported that Pennsylvania's state budget contains loopholes that citizens and businesses use to evade all or part of taxes they would otherwise pay - to the tune of $26 billion.

Now we know that what some consider loopholes are economic incentives to others, so there are arguments to be made over which are worth the revenue losses and which aren't.

It's time for that debate now, as state lawmakers struggle to find a way to pay for $8 billion in property-tax reductions.

Some Republicans want to abolish property taxes by reducing the sales tax rate but applying it to more items and services.

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Some items now exempt, the AP reports, include horses, yard-sale goods, electricity, caskets, school buses and over-the-counter medicine.

Eliminating these levies are less likely to irk citizens than extending the sales tax to certain professional services, including dry cleaning, hospital care and legal representation.

The only thing certain at this point is that the state's tax code will get more complicated. We anticipate that new taxes on services or food and clothing will be softened with provisions to exclude the poor from paying them.

It won't be easy, but it will be a chance for lawmakers to earn their pay.

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