Cutting Sales Tax Exemptions, A Budgetary Balm, Could Raise Prices In PA

HARRISBURG, PA — A plan that has been under consideration for years to reduce Pennsylvania's budget and eliminate inequities in the tax burden may finally be meeting its moment. But while it could have many positive effects, it could also drive up the price of certain items as impacted businesses seek to recoup costs.

The state's current policy allows some 109 sales tax exemptions on things like food, clothing, and other basic services. The exemptions are prized by industry and fought for voraciously by the business interests whom they serve. But they also cost the state billions.

Now, according to PennLive report, there could be bipartisan appetite to eliminate certain exemptions as a way to generate additional needed revenue.

“I think it behooves us to at least take a look at some of those exemptions and figure out whether or not those are really necessary," Republican Senate Majority Leader Joe Pittman told the outlet. “There are some exemptions that are more geared toward life-sustaining needs. There are other exemptions that are more geared toward wants."

Patch has reached out to Gov. Josh Shapiro's office for comment on the issue.

Officials point not just to the state's deficit, but also the coming slashes to federal grants for programs like Medicaid, funding crisis over SEPTA, and the recent passage of President Trump's "big, beautiful bill," which codifies some of these cuts. All of these factors could further pressure states like Pennsylvania into seeking alternative revenue sources.

Despite Pittman's willingness, and Democratic openness in the past to exploring this avenue, there are no specific plans on the table at the moment, so it's impossible to say what the fallout to the removal of exemptions might look like to Pennsylvanians.

"The question is, is there a balance there that we can find that maybe does generate some revenue to try to be helpful in figuring out how we reconcile this budgetary dynamic?" Pittman added to PennLive.

However, the nonprofit and nonpartisan Tax Foundation has proposed taxing retirement income, which is something states of a similar size and economy to Pennsylvania already do.

"Any long-term rebalancing of Pennsylvania’s tax code cannot ignore the complete exemption from taxation of all retirement income, an exemption that is far more generous than the tax treatment in peer states," the Foundation argues. "As the Commonwealth’s population continues to age, a policy which already turns away $3.4 billion in annual revenue cannot go unexamined forever."

They also propose a "modest expansion" of the tax base to include certain "personal services, amusements, candy and gum, and similar goods and services" which would save Pennsylvania around $900 million.

The Foundation also proposes a second option, and more broader expansion, which would generate about $3.5 billion and would include lifting exemptions on clothing, nonprescription drugs, household utilities, and motor fuels.

Those items and goods, in that case, could become more expensive.

Sales tax exemptions have already been reviewed and revised in recent years. The 2024 budget removed an exemption for cryptocurrency mining operations, which will go into effect at the end of 2025. But that same budget also added a new exemption for taxes on devices used by restaurants to collect grease waste.

Gov. Shapiro has not spoken directly one way or the other on exemptions as a way to resolve current budgetary issues, and any proposal would likely see significant debate and revision in both the state house and senate before it came to his desk.