Video: Minimum Wage Limits Opportunity

OCTOBER 31, 2014  | by JOHN BOUDER

Giving workers a boost in their hourly wages sounds like a good thing, doesn’t it? But, like most government-imposed market restrictions, it has some pretty negative consequences—like higher prices for consumers and fewer job openings for those looking to work.

CF’s Katrina Anderson recently made the case on WFMZ-TV's Business Matters that forcing hikes in labor costs by raising the minimum wage will harm family businesses and put young and low-skilled workers out of work.

Katrina points out that only 3 percent of Pennsylvania workers actually earn the minimum wage and the majority of them are under the age of 25. Forcing business to pay these workers more will surely make it harder for those first starting out to gain skills and work experience—effectively cutting off the first rung on their ladder to career success.

Indeed, many industries—like fast food—that have typically given low-wage workers their first job opportunity are transitioning to automation to control costs. Raising the minimum wage will only accelerate this process.

Katrina emphasizes that we want solutions that truly help lift the poor out of poverty, not policies that sound benevolent but actually limit opportunities for those that need it most.

For more on the minimum wage, please read our op-ed “The True Cost of Minimum Wage,” which tells the story of a small business owner considering automation as a response to a potential $15 minimum wage.

And check out the facts and figures in our policy points, “The Harmful Effects of a Minimum Wage Increase.”

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Taxes Hinder Pennsylvania's Progress

OCTOBER 31, 2014  | by BOB DICK

It may be boring and complicated, but a state’s tax code has a real impact on individuals and families who want to improve their quality of life. For instance, if Pennsylvanians are required to spend countless hours and dollars complying with Harrisburg’s complex tax laws, this leaves less time to invest in a business or save for the future.

Tax reformers often focus on the amount of revenue raised by a particular proposal. But the real focus should be on creating a tax climate that allows people to more easily improve their well-being. With this in mind, it was disappointing to read the Tax Foundation’s 2015 State Business Climate Index. It ranked Pennsylvania 34 out of 50, with 50 being the worst possible ranking. Here is a brief description of how the Tax Foundation created the Index:

The Index deals with such questions by comparing the states on over 100 different variables in the five important areas of taxation (corporate taxes, individual income taxes, sales taxes, unemployment insurance taxes, and property taxes) and then adding the results up to a final, overall ranking.

In its index, the Tax Foundation ranked Pennsylvania in each of the five tax areas mentioned above. The results are subpar:

  • Corporate Income Tax Rank: 46
  • Individual Income Tax Rank: 17
  • Sales Tax Rank: 24
  • Unemployment Insurance Tax Rank: 50
  • Property Tax Rank: 42

These poor rankings can be attributed to Pennsylvania’s second highest corporate tax rate in the country, highest unemployment tax rate in the nation, and a pension crisis putting added pressure on homeowners’ property tax rates.

Luckily, there is one bright spot: the state’s flat income tax. With a current flat rate of 3.07 percent, it is the lowest of any state (not including states without an income tax). Regrettably, there are proposals to replace the flat tax with a more progressive tax system, which would move us is the wrong direction for a variety of reasons.

For starters, more than half of all businesses in Pennsylvania pay taxes through the individual income tax. Raising this tax would adversely affect many of them, thereby hurting Pennsylvania's competitiveness. The perverse incentives created by this type of proposal are also troubling. If an individual is earning more money through hard work and success, he or she shouldn’t be punished with a higher tax rate. This is plainly unfair.

Pennsylvanians are already dealing with the 10th highest state and local tax burden in the country. Transitioning towards a system that allows people to keep more of what they earn would improve the commonwealth's business climate.

Pennsylvania has a prime opportunity to be a refuge from other states with even worse business climates. According to the Tax Foundation, four of the eleven worst states for business border our state. If lawmakers pursue policies than encourage people to live and work in the commonwealth, don't be surprised if people start voting with their feet.  

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Obamacare: Low Quality, High Cost


The federal government's health care overhaul is quickly becoming "Medicaid for all." The more we learn about the Affordable Care Act's (ACA) newly insured population, the clearer it becomes that most people gained low-quality health insurance.

For starters, the vast majority of individuals who gained coverage did not find policies on the exchange, but rather enrolled in Medicaid.

The Heritage Foundation found that Medicaid is responsible for 71 percent of the net growth in insurance coverage during the first half of 2014. Medicaid is taxpayer-funded insurance notorious for poor access and below average health care outcomes. In Pennsylvania, one in three doctors will not accept Medicaid patients.

But exchange patients are dealing with shortcomings too, from high out of pocket costs to limited access to primary care doctors. Both the New York Times and USA Today have documented serious affordability and access issues with exchange plans. In Indiana, one woman spent almost half a year trying to find a doctor that would accept her exchange plan:

"I definitely feel like a bad person who is leeching off the system when I call the doctors' offices," she says. Shawn Smith of Seymour, Ind., spent about five months trying to find a primary care doctor on the network who would take her with a new, subsidized silver-level ACA insurance plan.

A survey by the Medical Group Management Association found over 200,000 doctors will not participate in 2015 exchange plans.

What happens when millions of Americans obtain insurance that many doctors won’t accept? They end up in the emergency room.

Carolyn Oatman, a new Medicaid patient in Reno, notes that because it can take two months to get a doctor’s appointment, she opts for the emergency room. “I love it on Medicaid because now I can go the emergency room when I need to and don’t have to worry about the bill.”

No wonder Emergency Department visits in expansion states increased 5.6 percent from second-quarter 2013 to second-quarter 2014. In comparison, hospitals in non-expansion states reported a 1.8 percent increase in Emergency Department (ED) visits over the same time period.

ED visits are among the most expensive forms of health care and are often money makers for hospitals. In sum, Medicaid and exchange patients are seeking out the most-expensive yet least efficient form of care.

As Healthy PA rolls out, we should expect the same story to unfold. A spike in costly ED visits, as well as Medicaid and exchange patients struggling to find a doctor.

Limiting insurance options through countless regulations isn’t working. Patients are smart enough to figure out what they do and do not want their insurance to cover. It’s time to put them in control. Only choice and competition will make health care accessible and affordable for all consumers.

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Audio: Teachers & Taxpayers Still Need Paycheck Protection

OCTOBER 29, 2014  | by JOHN BOUDER

It’s important to note—especially during election season—that one group of private organizations has an advantage over all others when it comes to funding their political agenda. That group is public sector unions, which are legally permitted to use taxpayer resources to collect their political money.

That advantage is highlighted this week as disgraced state Senator Leanna Washington is expected to plead guilty to using state Senate staff time to coordinate fundraisers and catalogue campaign contributions.

Why do we prosecute Sen. Washington for using public resources for politics on the one hand while turning a blind eye to a violation of the same principle by public sector unions?

During a recent radio interview, Matt Brouillette explained how this principle should apply to everyone:

Because if the PSEA, NEA is able to do it then why should the NRA be able be able to have their dues and PAC contributions collected at taxpayers’ expense? The answer is quite simple and taxpayers agree with us all across Pennsylvania, Democrats and Republicans alike, is that no one should use public resources for political purposes.”

Paycheck protection empowers teachers with more control over how their money is spent on politics and levels the political playing field. According to Matt:

We need to make sure that those teachers who disagree with their union have a strong voice to able to express that. When you empower them to have to write checks to the union before the union gets their money, that’s a measure of accountability that union simply doesn’t want. They want to treat those teachers like ATMs [and] continue withdrawing money spending on behalf of people who support the union’s agenda, not necessarily the teacher’s agenda.

Listen here or below for more:

The Gary Sutton Show airs daily on WSBA 910AM in the York area.

Follow Commonwealth Foundation’s SoundCloud stream for more of our audio content.

And for mobile listening, get the SoundCloud iPhone and Android apps.

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AP Story Errs on Wolf Spending Plan


A recent Associated Press story questions part of our analysis of Tom Wolf's education spending and income tax proposals, specifically the notion that Mr. Wolf would have to double or almost triple the rate to fund $4.6 billion in additional spending.

Wolf has said he would not use the income tax alone to raise that new money. His other proposals include imposing a 5 percent severance tax on Pennsylvania’s thriving natural gas industry and closing business tax loopholes.

We welcome critical review of our work, and will admit to any errors in our analysis. However, we did not overlook these details as the AP story claims. 

First off, our analysis did account for Wolf's proposed natural gas tax, which his campaign estimates would raise about $1 billion.

But this $1 billion estimate is before replacing the revenue already generated by the impact fee (which Wolf has indicated he plans to do). Wolf's "Fresh Start" plan also indicates that severance tax revenue would be used for more than education. He plans to use some of the revenue for "infrastructure" and "development of clean energy alternatives."

In addition, our analysis lists 18 additional spending proposals in Wolf's Fresh Start plan, which are not paid for with any new revenue streams. The cost of just one of these initiatives—universal preschool—would exceed $1 billion. Our assumption that the total cost of these proposals, if enacted, would equal the remaining severance tax revenue after replacing the impact fee and funding infrastructure and clean energy, is extremely generous.

Second, while Wolf does propose "closing business tax loopholes," he plans to use this revenue in other ways. Wolf’s Fresh Start plan says closing loopholes and tax incentives would be used strictly to lower the Corporate Income Tax rate:

By implementing combined reporting and tax credit reforms, Tom Wolf will be able to lower the corporate income tax rates for Pennsylvania’s small businesses, which struggle to pay their taxes under the current system.

Wolf’s plan also calls for the retention or creation of business tax credits that are “tied to the creation of good paying, middle-class jobs.” 

Our analysis of Mr. Wolf's proposals is thorough, generous and as detailed as possible. Yet the AP characterized our estimates as, "hypothetical analyses whose value is mainly political."

In short, our research and analysis more accurately represents Wolf's proposals than the AP story.

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PLCB Ethics Scandal (Again)

OCTOBER 24, 2014  | by DAWN MELING

Pop quiz! What year is this headline from?

A. 2014
B. 2013
C. 2012
D. 2011
E. All of the above.

If you answered E., you win! (And Pennsylvanians lose.)

Excellent reporting from Kari Andren of the Tribune-Review today revealed that the Pennsylvania Liquor Control Board (PLCB) and its employees are under investigation by a federal grand jury for potential "improper relationships with wine and spirits vendors doing business with the agency."

If you aced the quiz above, this should come as no surprise. Such reports now are about as regular as the changing of the seasons. Andren reports:

A significant pattern of wrongdoing or potential violations that cross state lines could prompt federal officials to look into the case, he [law professor John Burkoff] said. Earlier this year, the Ethics Commission found the former top-ranking LCB officials guilty of taking all-expense paid trips to Florida and California, golf outings across Pennsylvania, high-end merchandise and fancy meals, all on the dime of executives and sales people at national wine and spirits companies.

The rounds of golf, dinners and hospitality gave vendors direct, informal access to influential LCB employees who played a variety of roles in selecting what wines and spirits would line the shelves of more than 600 state-owned liquor stores across Pennsylvania.

When will these ethical scandals stop? When will taxpayers stop paying for the moral and monetary mismanagement of a state-run alcohol system that most Pennsylvanians don’t even want? A government booze monopoly will continue to breed corruption and mismanagement until, once and for all, we get government out of the business of selling alcohol.

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Huge Premium Hikes Expected in PA Exchange


Health Care

Premiums are poised to rise significantly in Pennsylvania in year two of the Affordable Care Act (ACA). Three insurers announced this week that they are seeking premium increases of more than 10 percent.

Highmark is asking for increases up to 15 percent, Gesinger up to 19 percent and Independence Blue Cross up to 14.9 percent. The reason, according to Highmark spokesman, is “pent-up demands for care.”

Last year, about 250,000 Pennsylvanians lost their insurance because the ACA determined their coverage was substandard. Some of those individuals received a reprieve when the Pennsylvania Insurance Commissioner allowed insurers to continue pre-ACA plans until 2016. Now, Highmark is canceling those plans to bring them up to ACA standards. Translation: get ready for hefty out-of-pocket costs.

Tom Peters of Ross Township would like to keep his $288 premium and $2,200 deductible plan another year. A similar plan on the exchange, however, would cost him $290 a month with a deductible of $6,300.

In fact, the ACA is raising deductibles so much that people are choosing to delay or forego care. The New York Times reported on several individuals who are avoiding treatment because they can’t afford their deductible. For example, Gina Brown avoided the doctor when she got an ear infection. Her deductible was $4,000.  

Discouraging necessary care is the result of government mandates that dictate what insurance must include. All ACA plans must provide "free" preventative care as defined by Washington D.C. But the fact is preventive care looks different for everyone. For cancer survivors it might mean yearly scans, for a diabetes patient it might mean regular visits with a nutritionist, while for others, immunizations and annual check-ups would suffice. What's more, "free" preventive care is often priced into higher premiums. 

It's clear the mountain of consumer protections within the ACA is doing more harm than good.

Only by eliminating mandates can consumers can regain control and lower out-of-pocket costs. After all, potential patients, not bureaucrats or insurance companies, are best equipped to decide which health care services matter the most.

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What are Their Priorities?

OCTOBER 24, 2014  | by DAWN MELING

PSEA Political Money

At at time when teachers are complaining about having to buy school supplies for their students, the Pennsylvania State Education Association (PSEA) reported spending $3,764,154 from union dues on political activities and lobbying alone in 2013.

We looked at prices from for our school supplies: pencils, pens, notebooks, and scissors. By simply using their political money to buy school supplies, the PSEA could have bought 1.7 million pens, 1.7 million notebooks, 1.7 million scissors, and 3.4 million pencils—enough for every single public school student in Pennsylvania. 

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Victory for Student Safety

OCTOBER 23, 2014  | by JAMES PAUL

In an important step for safety in the classroom, the Pennsylvania legislature passed a bill that will put an end to the abhorrent practice of “passing the trash.” Gov. Corbett recently signed HB 1816, which prevents teachers accused of abuse from quietly resigning and relocating to a new school without having to inform that new school of their alleged misconduct. The law strengthens the background check process and prohibits school districts from entering into “confidentiality agreements” that suppress abuse allegations.

Government unions had previously taken a neutral position on this commonsense legislation.

Of course, the vast majority of teachers are committed to the well-being of their students. But state lawmakers should be commended for addressing the rising claims of inappropriate relationships, abuse, and staff misconduct in the commonwealth. A most tragic victim of "passing the trash" was Jeremy Edward Bell, a twelve year old student who did not surivive educator abuse. HB 1816 will help ensure that such an atrocity never happens again. 

Having approved this important safety measure, attention should now turn to improving the quality of education in the commonwealth, both through expanded school choice and commonsense reforms to reward excellent teachers.

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Video: There's No Magic Money Tree

OCTOBER 23, 2014  | by JOHN BOUDER

Growing money on trees

From education to health care to public pensions, it seems like the answer to every problem—for some—is always more spending. But where does that money come from? And why doesn’t it ever seem to solve the problem?

Matt Brouillette debated taxes and spending with Pennsylvania Budget and Policy Center Executive Director Sharon Ward earlier this week on PCN TV’s Call-In Program. It would be an understatement to say their views differ.

One of the most frequently discussed sources of new revenue is a new severance tax on natural gas. This tax would be in addition to all the taxes businesses in that industry already pay. Matt says the industry should—and does—pay for the cost of government they use:

Beyond the question of whether it’s fair, would imposing a severance tax even cover the cost of new education funding proposals? If not, where will that extra money come from, since, as Matt says: “There isn’t a magic tree growing along the Susquehanna where this money comes from—it comes from working Pennsylvanians. And it will be the middle class that gets hit the hardest in this.”

Matt points at that we’re fooling ourselves if we think more money is the answer, especially when it comes to education. In Pennsylvania, per-pupil spending is already at an all-time high. More dollars won't make more scholars:

Watch the full show at

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Who are We?

The Commonwealth Foundation is Pennsylvania's free-market think tank.  The Commonwealth Foundation crafts free-market policies, convinces Pennsylvanians of their benefits, and counters attacks on liberty.