An intimidating budget shortfall this year and next has state leaders calling for a change to the status quo. That is: surging state spending. Governor Wolf is pulling back on corporate welfare programs, like Keystone Opportunity Zone tax breaks, while legislative leaders have called for "restructuring" state government. The economic evidence backs this up.
This year's Economic Freedom of North America report from the Fraser Institute shows Pennsylvania's record high spending is undeniably linked with less economic opportunity.
The state ranks a disappointing 30th when it comes to controlling state spending and an abysmal 37th in income and payroll tax revenue as a percent of personal income. In other words, Pennsylvanians have seen their tax burden increase and economic opportunity decrease as state debt and state spending continues to climb.
Overall, this year's index, including data from 1984 to 2014, ranks Pennsylvania 18th among the states.
The report emphasizes a lesson Pennsylvania desperately needs to learn: Unrestrained government spending doesn’t create economic growth—it kills it. But responsible spending growth will allow lawmakers to ease the tax burden for everyone. That’s how you create an environment of opportunity and economic growth for all Pennsylvanians
For the first time in 31 years, Pennsylvania's population is shrinking. The Census Bureau reports Pennsylvania’s total population fell by more than 7,600 last year. In state-to-state migration, one Pennsylvanian left the commonwealth every 11.5 minutes—that's a loss of 46,000 from July 2015 to July 2016.
Nationwide, Pennsylvania is an outlier. We are one of just eight states that lost population. In contrast, many states seeing population growth—including Texas, Florida, North Carolina, Nevada, and Idaho—have lower tax burdens than the commonwealth.
A Gallup poll conducted last year found residents in states with higher state and local tax burdens are more likely to want to leave than those in lower-tax states.
Lower taxes starts with limiting government spending. Had Harrisburg limited spending growth to inflation and population since 2000, Pennsylvanians would be saving nearly $22.2 billion in taxes, or $6,952 per family of four.
Without bold steps to spend responsibly and lighten the tax burden, we'll continue to see fellow Pennsylvanians flee to friendlier tax climates.
As Harrisburg searches for politically acceptable tax hikes to fund a record-breaking budget, Pennsylvania’s attractiveness to manufacturers continues to decline. According to a study reported by the Central Pennsylvania Business Journal, local manufacturers operate under an already onerous tax load.
The report, prepared by Ball State University’s Center for Business and Economic Research in Indiana, graded states on a number of factors, including benefit costs and tax climate. Manufacturing in the commonwealth earned a grade of C- this year, down from a C in 2015.
The study examines factors most likely to be considered by site selection experts for manufacturing and logistics firms, and by the prevailing economic research on growth, according to the researchers.
Michael Hicks, director of the research center, says high taxes are particularly problematic for Pennsylvania manufacturing.
The Keystone State earned a D for worker benefit costs and a D- for tax climate in the study.
“I think it’s fair to state that in Pennsylvania the effective tax rate is rather burdensome,” Hicks said.
Pennsylvania, like many states, offers tax-abatement programs for business, but Hicks noted that they may not help.
“The problem is that most job growth in manufacturing comes from existing companies,” which may not have access to incentives aimed at startups, he said.
With Pennsylvania already bearing the 15th highest state and local tax burden in the nation and the state’s manufacturers withering under its weight, what good reason is there to increase taxes?
None is the answer.
Pennsylvania's economy isn't looking so hot this summer. The Bureau of Labor Statistics reports:
- Pennsylvania lost 23,600 jobs in the last two months (nonfarm, payroll jobs).
- Over the same time frame, the unemployment rate climbed 0.6 percent with 43,900 more individuals officially counted as unemployed. Over a three month span, the unemployment rate rose 0.9 percent, and 60,500 more individuals were unemployed.
- Pennsylvania now exceeds the national unemployment rate.
Here’s some worse news: Our poor economic performance is part of a long-term trend.
- Pennsylvania lost 41,600 residents in net moves to other states last year—one person every 12.5 minutes.The Keystone State has lost 295,000 residents with $11.6 billion in annual income since 1992.
- From 1991 to 2015, Pennsylvania ranked a dismal 46th in job growth, 45th in personal income growth, and 46th in population growth.
- Pennsylvania currently has the 15th highest state and local tax burden.
This bad news comes at a critical juncture in state budget negotiations. The question for lawmakers: Will raising taxes on families offer good news?
History indicates it won't.
The commonwealth, on net, loses one person every 12.5 minutes. Some say it's all about the weather, but a recent Gallup poll found another reason. Across the country, residents in high-tax states are more likely to want to leave than those in lower-tax states.
Decades of high taxes, growing red tape and rising debt are driving Pennsylvanians away. Can you relate? Have you left the keystone state for brighter opportunities? Share your story below and help us show Harrisburg that higher taxes are the wrong way to go.
In the Wall Street Journal, Florida Governor Rick Scott makes a mockery of Pennsylvania Governor Tom Wolf and his quest to raise taxes, calling Wolf one of his "favorite governors."
"Every time they raise taxes,” Mr. Scott says, “it’s basically a gift to Florida."
Florida’s population increased by 350,000 last year, and IRS data confirm that many were exiles from high-tax California, Connecticut and Pennsylvania.
As we've pointed out recently here, Pennsylvania has long been losing residents to other states—more than 40,000 lost in net state to state migration last year alone, or one resident every 12.5 minutes.
Pennsylvania and other high tax states are losing to states with lower overall tax burdens.
Not to worry though. Gov. Wolf has a solution! He's going to change the slogan for tourism!
Of course we all know slogans are the key to economic growth and job creation. Take this quick poll and tell us what you think Pennsylvania's new Tourism Slogan should be.
At the beginning of 2015, we heard a lot about a "fresh start" for Pennsylvania. But nine months later, it's difficult to identify anything fresh about Gov. Wolf's tax, borrow and spend plan.
In fact, Philadelphia Daily News columnist John Baer pointed out that every Pennsylvania governor since the 1970s has raised taxes. Reading that, I naturally thought, “Yeah, well maybe we should stop doing that.”
Some Democrats argue that tax increases are part of responsible governing, noting that every governor elected since the '70s - Milton Shapp, Dick Thornburgh, Bob Casey, Tom Ridge, Ed Rendell, Tom Corbett - raised taxes (the argument is Corbett's fuels-tax hike for $2.3 billion in road and bridge repairs counts).
But Republicans say maybe that's the problem. Maybe the state's economy would be better with lower taxes.
Nate Benefield, of the conservative Commonwealth Foundation, makes the case against raising taxes: "Overall, our tax burden has gone up, and yet we have stagnant growth, among the slowest in the country."
Pennsylvania's ranking in state and local tax burden, according to the respected D.C.-based Tax Foundation, is 10th heaviest among states and third heaviest among the most populous states, behind New York and California.
In other words, for 45 years Pennsylvania politicians have been raising taxes—resulting in anemic job growth, income growth and population growth.
- Since 1970, spending has increase by an inflation-adjusted $13,800 per family of four, or $3,450 more per resident.
- As a result, Pennsylvanians labor under the 10th highest tax burden in the country, up from 20th in 1977 and 25th in 1991.
- From 1970 to 2014, Pennsylvania has ranked a dismal 49th in job growth, 45th in personal income growth, and 48th in population growth.
Ironically,Gov. Tom Wolf suggests his $4.6 billion, $1,400 per family of four tax increase represents a new way of doing things in Harrisburg. Raising taxes to historic highs, while rejecting real pension reform or liquor privatization, isn't fresh or innovative. It's the same thing we’ve been doing for decades.
It’s time we stop repeating the same failed mistakes of the past.
What do Switzerland, the United Arab Emirates and Canada have in common? Their citizens all enjoy more economic freedom than Americans.
According to the 2015 Economic Freedom of the World Index, the United States ranks 16th, down from a rank of 2 in 2000. Americans are losing their economic freedoms while the rest of the world is becoming more free.
The Economic Freedom of the World Index measures economic freedom by analyzing five areas: size of government, legal structure and property rights, access to sound money, free trade, and regulation. The U.S. scored the lowest in the size of government and protection of property rights categories.
Economic freedom is more than an academic concept; it's critical for prosperity. Economic freedom is positively associated with higher average per-capita GDP, longer life spans, higher incomes for the poor and more civil liberties.
To read more about the benefits of expanding economic freedom visit www.freetheworld.com.
Last Saturday Pennsylvanians passed an important milestone: Tax Freedom Day. This is the day Pennsylvanians earn enough dollars to pay off their federal, state and local tax bills for 2015.
Pennsylvania's celebration came one day after national Tax Freedom Day, making us the 36th state to celebrate. Last year we did slightly better as the 35th state to celebrate on April 21st.
However, Tax Freedom Day has arrived later and later each year as government spending has climbed. For some perspective, national Tax Freedom Day was January 22nd in 1900.
Is placing 39 out of 50 in any competition acceptable? Most people would say no, which is why a new index published by the American Legislative Exchange Council (ALEC) is so unsettling.
Released on an annual basis, the Rich States, Poor States index ranks states based on their economic performance and economic outlook. In the first category, Pennsylvania performed poorly, ranking 39th. Future economic performance doesn’t look promising either. The authors of the index place Pennsylvania in the bottom ten at 41.
The rankings are based on fifteen different variables that include tax rates, debt service as a share of tax revenue, labor regulations, and tax or expenditure limits. Pennsylvania ranks poorly in nearly all of these areas year after year. As Jana Benscoter of Watchdog points out, Pennsylvania’s economic outlook ranking has never been higher than 33rd.
This isn’t surprising given the dramatic growth of government spending and taxation since 1970 and Pennsylvania’s inhospitable regulatory environment, both of which are roadblocks to job creation and prosperity.
But Pennsylvania doesn't have to continue down this path. If the commonwealth lowers the tax burden on businesses and families, restrains spending growth, and fixes its regulatory climate, we can shed these low rankings and grow an economy that works for everyone.
We're at a watershed moment, with a choice between the largest tax hike in Pennsylvania's history or reducing government spending to leave more in the pockets of Pennsylvanians. It's a choice between prosperity or economic stagnation.
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The Commonwealth Foundation is Pennsylvania's free-market think tank. The Commonwealth Foundation transforms free-market ideas into public policies so all Pennsylvanians can flourish.