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Pa. lawmakers back off warehouse tax as revenue plan remains elusive

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A proposal floated in recent days to remove a sales tax exemption for warehouse services seems destined for a "return to sender" label following opposition from business leaders who said it would hurt one of the midstate's leading industries.

The proposal surfaced as lawmakers work toward a plan to pay for state spending.

"Luckily it was an idea never introduced then," Stephen Miskin, a spokesman for House Republicans, said Tuesday, noting that lawmakers continue to meet on a plan. "Lots of rumors ... not all accurate."

The warehouse tax emerged as a way to replace a severance tax on Marcellus Shale drilling, which the House GOP has opposed. Lawmakers in the House and Senate have been at odds since June on how to close a roughly $2.3 billion hole in the 2017-18 budget.

Economic development officials, including the leader of the Cumberland Area Economic Development Corp., have been sending letters to their local legislative delegations, asking those lawmakers to oppose the expanded sales and use tax, which was projected to raise more than $150 million in revenue under Gov. Tom Wolf's budget proposal in February.

Removing the sales tax exemption on warehouse services would largely impact third-party logistics providers that run distribution centers for large manufacturers and retailers across the state.

The warehousing and logistics industry is a significant economic driver for much of Central Pennsylvania and the Lehigh Valley, most notably along the Interstate 78/81 corridor and Interstate 83. Business leaders say a sales tax on commercial storage would force companies to consider doing business in other states.

"While consumer spending habits may be moving from Main Street retail to online retail, warehousing and logistics are still needed to get online retail purchases to consumers," Jonathan Bowser, CEO of CAEDC, said in a letter to members of the Cumberland County legislative delegation. "Having tremendous proximity to population centers and interstate corridors, Cumberland County continues to see growth in this sector."

The transportation and warehousing sector is the No. 2 industry in Cumberland County, he said, representing about 12.5 percent of the county workforce.

If that tax idea is dead, it remains unclear what House Republicans will support in terms of new revenue streams. The Associated Press reported Tuesday afternoon that Republicans were raising the possibility of a 5 percent statewide hotel tax — on top of the existing 6 percent state tax on hotel reservations — to replace the warehousing tax.

The House GOP has largely preferred measures that do not involve raising taxes, including a variety of special fund transfers. Asked if that was still the preference or if any other revenue plans were to be introduced, Miskin said "Honestly, we are still working on this."

The GOP-led Senate has sided with Wolf on raising revenue. In July, the Senate passed a plan that included a severance tax, heavy borrowing against future revenue, increased utility taxes and expanded casino gambling. But the House opposed the tax increases. 

Rep. Stephen Bloom (R-Cumberland) said he was expecting some new version of a budget package Tuesday afternoon, but added: "If one can be negotiated."

Gambling expansions are reportedly still a part of the ongoing budget negotiations, according to The Morning Call. The expansion could include allowing video game terminals at truck stops and creating "mini casinos" in rural areas of the state.

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Jason Scott

Jason Scott

Jason Scott covers state government, real estate and construction, media and marketing, and Dauphin County. Have a tip or question for him? Email him at jscott@cpbj.com. Follow him on Twitter, @JScottJournal. Circle Jason Scott on .

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