Digital Downloads Taxed as Pennsylvania Closes Budget Shortfall

Updated on
  • Apps, e-cigarette taxes to help close $1.3 billion gap
  • Lawmakers passed revenue bills Wednesday to balance budget

Pennsylvania’s legislature approved a hodgepodge of taxes to close a $1.3 billion budget shortfall that spurred S&P Global Ratings to warn that it may downgrade the state.

Lawmakers Wednesday acted to extend taxes on previously exempt smokeless tobacco and e-cigarettes, increase the tax on a pack of cigarettes by $1, and levy the state’s 6 percent sales tax on digital downloads such as apps and music.

Governor Tom Wolf, a first-term Democrat, let a $31.5 billion budget passed by the Republican-led legislature for the year that started on July 1 become law without his signature after dropping his demand for an increase to income and sales taxes. Wolf said he’ll sign the measures approved by the legislature.

"This package is an important step forward and includes sustainable, recurring revenue that makes significant progress toward reducing our structural deficit," he said in a statement.

S&P said Monday that the state’s AA- rank, the fourth-highest investment grade, may be cut if lawmakers failed to balance the budget within 90 days. The state plans to sell $1.2 billion in general obligations next week.

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