During the first week of May, the House adopted its tax package by a 131-24 vote - well over four-fifths of the House members being recorded in favor. Legislative leaders consider it critical that whatever tax package is on the governor's desk have at least two-thirds support of the membership in order to override any veto.

Estimated to generate $1.06 billion in new revenues, the House tax package includes: a freeze on the income tax at 5.3%; a 5.3% tax on capital gains; a repeal of the charitable deduction; a reduction by 25% in the personal exemptions (i.e., from $4,400 for a couple/family to $3,300); and a 75 cent raise in the cigarette tax. A tax amnesty program was also adopted and could bring-in an added $35 to $40 million.

At presstime, Senate leaders have reported that they have "veto-proof" support in their chamber (over two-thirds of the senators) for the House tax package. It's expected that during its debate on the budget, the Senate will consider additional options, which may possibly include using more reserve funds, establishing a new 5% alcohol tax, or limiting prizes from the State Lottery.

As is the case with the July 1 budget itself, any differences between the two tax proposals will be resolved by a conference committee. Once agreed upon and adopted by both chambers, the final version will be sent to the governor for her signature.

"There's no question every effort has been made to formulate a tax package that is balanced and fair, given the enormity of the current fiscal crisis," states Association President Ralph White. "If these hard decisions were not made, then undoubtedly we would have before us a state budget that would have hurt retirees and all the citizens of the Commonwealth."