A slew of tax reforms got pulled into Pennsylvania state budget negotiations over the past few weeks. The policies match up with broader debates that have plagued Harrisburg for years.<\/p>\n
Pennsylvania statute mandates lawmakers to pass a general fund budget each year on June 30th. Both the senate and house have session scheduled through out the weekend, with some sources close to negotiations saying a deal could be signed by Sunday or Monday.<\/p>\n
Disputes over how much to spend have long contributed to delays and impasses. Pennsylvania has had a structural deficit for at least two years (the state spends more than it makes in revenue annually), and uses savings left over from COVID inflation to balance costs.<\/p>\n
While last years arguments focused on increasing spending in areas like education and mass transit, this year\u2019s debates switched to reducing revenue through tax reforms.<\/p>\n
Pennsylvania collected $48.92 billion in revenue in the 2025\/26 fiscal year, but around $1.94 billion was returned through tax credits and refunds.<\/p>\n
The following is a list of the tax ideas floated through Harrisburg in the summer of \u201926:<\/p>\n
Education Improvement Tax Credit (EITC): This program, founded 25 years ago, allows businesses and individuals to allocate their state taxes to private education institutions instead of the money getting deposited into the general fund. The funds go to scholarship organizations, who distribute the money to schools, who use it to cover tuition for students whose families apply for financial aid.<\/p>\n
This year, Republicans want the program cap to increase by $25 million.<\/p>\n
House Democrats added program reforms (like ensuring students from low income families are prioritized in scholarships and broader transparency measures) to the $25 million request in an amendment last week.<\/p>\n
Data Center Equipment Tax Credit: Pennsylvania created a tax refund<\/a> for data center facilities in 2021, allowing approved projects to avoid sales and use tax on some equipment.<\/p>\n Both the House and Senate voted to abolish that tax credit<\/a> in the last week of June, but with the language amended into different bills. The language has not reached Democratic Gov. Josh Shapiro\u2019s desk.<\/p>\n GRID: The Governor\u2019s Responsible Infrastructure Development (GRID) program<\/a> applies to data center projects. The plan offers tax incentives and permitting fast tracks, IF data center projects comply with the following rules:<\/p>\n Protect energy affordability (provide their own clean power source so the broader electric grid is not drained of supply, which could raise electricity prices for home and business owners).Meet transparency rules (be up front with local governments and citizens about energy, water, noise, and visual impacts of projects).Engage with local communities (ex. invest a minimum of $250 million and create 200 jobs)Protect the environment (mitigate the energy\/water damage projects could bring to areas).<\/p>\n The proposal has been criticized by some Republicans as too stringent in requiring clean power. A growing number of grass roots groups that oppose data center development say the standards aren\u2019t enforceable, as a company could skip the tax\/permitting benefits and build using traditional routes while ignoring the GRID rules.<\/p>\n The benefits program did pass the House, but has not been taken up in the Senate at this time.<\/p>\n The tax benefits offered in Shapiro\u2019s GRID program are broader than the singular benefit mentioned above that the House and Senate voted to eliminate.<\/p>\n Eliminating 5.9% tax on electricity sales: The state charges electric companies a gross receipts tax of 5.9% for their sales. The House voted to eliminate that tax, which could give the average resident a $143 annual saving<\/a>. Eliminating the tax could cut revenue for the state by $1.7 billion in the 2026\/27 fiscal year, according to a senate fiscal note<\/a>.<\/p>\n