Should Economic Power Reside in Harrisburg?

Pennsylvania leads the nation…in corporate welfare. Since 2007, the commonwealth doled out more than $5.7 billion in economic subsidies to private organizations, which is just one of the many startling findings in our latest policy brief, The Costs of Corporate Welfare.

What has this nearly $6 billion brought? A subpar economy. From 2005-2015, Pennsylvania ranked 35^th in job growth, 31^st in personal income growth, and 38^th in population growth. Simply put, providing taxpayer subsidies to private organizations in the name of economic development has failed to jolt the state’s economy out of its decades-long slump.

Instead of empowering workers and entrepreneurs to grow the economy, corporate welfare has empowered government bureaucrats to pick winners and losers. This concentration of economic power comes at the expense of working people who must subsidize the financial privileges conferred to favored interests. Matt Mitchell, a senior research fellow at the Mercatus Center, explains why such privileges are harmful:

When governments dispense privileges, smart, hardworking, and creative people are encouraged to spend their time devising new ways to obtain favors instead of new ways to create value for customers. Privileges depress long-run economic growth and threaten short-run macroeconomic stability.

A system that rewards businesses based on their capacity to apply for government funding rather than their ability to meet the needs of consumers is unfair to taxpayers and entrepreneurs who compete in the market. Why? Because such a system diverts resources from private investment, which can improve the lives of everyone, to lobbying for government privileges, which favors the politically-savvy and well-connected.

The alternative to this type of government favoritism is economic freedom—a concept predicated on the notion that people should be free to work, create, and innovate without being handcuffed by unreasonable government restrictions. One component of economic freedom is a low tax burden, which Pennsylvania does not enjoy.

Improving our tax burden would transfer money and power back to Pennsylvania’s communities, creating an abundance of economic opportunities. Lawmakers can facilitate this transition by eliminating corporate welfare from the budget, using the savings to lower taxes on all businesses and individuals.

This reform would end the practice of showering subsidies on moneyed interests like racehorse owners, film producers, and large corporations. Instead, the money would stay with the people who put in the effort to earn it. 

You can read more about the costs of corporate welfare here.