My proposal begins with commonsense changes to our state tax system:

First, Pennsylvanians have spoken and so has the House of Representatives. They believe that it makes sense to tax cigars and other smokeless tobacco products as well as to tax Marcellus Shale extraction. Once again, it's simply not fair that big tobacco and big oil and gas are exempt from the obligations the rest of us have to bear. The revenues raised by these initiatives are overwhelmingly supported by our fellow citizens, and would provide a half a billion dollars for the Stimulus Transition Reserve Fund. Similarly, let's stop rewarding businesses by giving them a bonus for obeying the law and paying their taxes on time. Doing so allows us to generate $150 million for the Stimulus Transition Reserve Fund.

Next, we should eliminate the 74 non-essential exemptions to the state sales tax. Under our proposal, there will still be no sales tax imposed on essential items like food, clothing, and prescription drugs. And it preserves sales tax exemption for our manufacturers and non-profit cultural institutions. But we will eliminate exemptions for professional services like fees for lawyers and accountants, as well as a variety of other non-essential products and services.

By closing these loopholes, we can broaden the base of the state sales tax and actually reduce it from six percent to four percent. Let me put it another way: my proposal will cut the sales tax statewide for every Pennsylvanian by one-third.

The sales tax today is a testament to the power of lobbyists and special interests. There is little rhyme or reason why we tax some items or services and wholly exempt others, except that in years past someone lobbied to secure favored treatment for themselves at the expense of others. As the Pennsylvania Budget and Policy Center pointed out last year, a simple trip to the movies "provides insight into the patchwork nature of Pennsylvania's sales tax. The rental of the movies by the theater, the admission ticket and candy and gum purchased at the counter are all exempt from taxation. (But) popcorn and soda purchased at the same counter are subject to sales tax."

Some exemptions defy logic. If you do your own laundry, the laundry detergent is subject to the sales tax. But if you have your laundry done, it's sales tax free. Soda is taxed in Pennsylvania, but bottled water and fruit juices - products often made by the same soda companies - are not.

My proposal calls for the elimination of these loopholes so that everyone pays his or her fair share of the sales tax. To those who argue that this is a tax increase that will hurt our citizens and our business competitiveness, I say that the evidence demonstrates otherwise. For the average family, eliminating these loopholes doesn't impact them one way or the other. But for business, closing the loopholes actually will allow many businesses - those who already pay sales tax - to become more competitive. It also means that Pennsylvania will no longer lose sales to New York, where the sales tax rate is at four percent today.

Repealing these exemptions does not create a competitive disadvantage for our Commonwealth. Thirty-six other states tax movie tickets and other amusement events, thirty-two other states tax magazines, forty-two other states tax over-the-counter drugs, and every other state that has a sales tax taxes personal hygiene items. Pennsylvania today applies the sales tax to fewer goods and services than our neighbors in New York, New Jersey, Ohio and West Virginia.