Economy




Recent Issues

Burdens of Obamacare

AUGUST 30, 2013 | Commentary by ELIZABETH STELLE

Say you’re working your way through college, supplementing student loans with a part-time job managing inventory at Wegmans. You make a decent hourly wage, but your health insurance benefits are key, saving you thousands per year in premium costs. Then, one Monday, your boss tells you part-timers are no longer eligible for benefits.

The Real Victims of a Severance Tax

JUNE 7, 2011 | Commentary by KATRINA ANDERSON

Jim VanBlarcom, a busy Bradford County dairy farmer, set a work day aside to come to Harrisburg and tell his story to Gov. Tom Corbett's Marcellus Shale panel. Royalty money from leasing farmland helped him double his dairy herd size, and he's glad the industry's here.

Fixing Rendell's Mess

JANUARY 20, 2011 | Commentary by KATRINA ANDERSON, NATHAN BENEFIELD

Rendell's Mess

Penn's Woods are darker and deeper in red ink than ever before thanks to the tax-borrow-and-spend agenda of the Rendell Administration and some General Assembly members who failed to put Pennsylvania back on a path to prosperity.  To add insult to injury last month, the U.S. Census Bureau announced that Pennsylvania would lose another Congressional seat in 2012 due to stagnant population growth.





Recent Blog Posts

Unpopular Attempt to Undo Uber

OCTOBER 2, 2014

Last week two Pennsylvania Utility Commission (PUC) administrative law judges recommended against legalizing the popular transportation service Uber in Allegheny County. The reason? The company, "is not committed to operating safely and legally."

Why do they claim Uber is putting public safety at risk? The company refused to provide numbers on how many trips it provided while under a July cease-and-desist order. 

It's no surprise ride-sharing companies like Uber and Lyft are in a tussle with the state bureaucracy. Entrenched special interests, in this case taxicab companies, regularly use government to exclude new competitors. Think about state Certificate of Need laws that require doctors to seek government permission to purchase a new MRI scanner. Or professional licensing laws that require hair braiders to accrue 300 hours of training.

In this case, it's clear the opposition consists mainly of Uber's competitors. Support for ride-share companies is bipartisan. Both Governor Tom Corbett and Pittsburgh Mayor Bill Peduto have expressed their support for ride-sharing companies.

The media agrees the PUC’s position is unreasonable. A Pittsburgh Post-Gazette editorial describes Uber as "a highly innovative ride-share service that people in the Pittsburgh area are clamoring for after years of shabby and sometimes non-existent taxi service."

It’s time for the PUC to stop obstructing consumers' wishes and let ride-sharing flourish. Given the PUC's outdated regulations, there are several pieces of legislation to change the law to let ride-sharing companies like Uber, Lyft and others continue to meet the needs of consumers.

posted by ELIZABETH STELLE | 04:40 PM | Comments

Study: Selective Carve-Outs Make Poor Tax Policy

AUGUST 7, 2014

Lawmakers across the country have promoted specific, targeted tax breaks that encourage businesses to invest in their state. According to a recent study, these incentive programs are ineffective at promoting widespread economic benefits, despite being advantageous for certain firms and industries. 

The study, published by The American Legislative Exchange Council (ALEC), examines "the use of public policy to benefit a specific industry, firm, or individual, as opposed to setting broad and generally applicable rules and policies that apply to society as a whole." These include targeted tax breaks or cash subsidies for select firms, as well as preferential tax treatment for firms located in a given geographic area.

ALEC finds that while this type of tax favoritism is not illegal, these programs stunt a state’s potential growth. Tax carve outs, while helping ease the tax burden for select businesses, create an uneven playing field on the whole.

When select businesses are exempt from the standard tax rate, the tax base decreases. ALEC notes that "with a smaller revenue base, states must continually raise tax rates to get the desired amount of revenue." Overall, this results in most businesses paying higher taxes, as they are forced to subsidize the lower tax burden of firms receiving preferential treatment.

To achieve a state's greatest economic potential, carve-outs must be eliminated altogether. Tax policy should be competitive and equal for all businesses. 

posted by EMMA CRISCI | 05:00 PM | Comments

New Evidence: Taxes Stunt Economic Growth

JULY 30, 2014

Pennsylvania Economy

A recent Mercatus Center study provides new evidence that higher state taxes correlate with reduced state economic growth. 

Pavel A. Yakovlev, a professor at Duquesne University in Pittsburgh and member of the Commonwealth Foundation Council of Scholars, found higher taxes lead to reduced gross state product (GSP), reduced per-capita income, fewer new businesses, and less immigration.

A one percent average tax rate increase correlates with a 1.9 percent decrease in the GSP growth rate. When states have high taxes and more spending, they experience slower economic growth. This is no secret in Pennsylvania. As the Commonwealth’s taxing and spending increased from 1970 to 2012, economic growth lagged behind the national average.  

A one percent increase in a state’s average tax rate correlates with a .07 percent decrease in per capita income. When taxes increase, extra costs are incurred, leading to layoffs and pay cuts. 

A one percent increase in personal income tax progressivity correlates with a 1.2 percent decrease in the number of new firms in the state. Firms are more likely to leave or choose not to locate in a state where success dictates a higher tax burden.

As personal state income tax rates increase, immigration rates decrease. Income taxes—or lack thereof—play a role in where Americans choose to live. Four of the nine states with no income tax (Florida, Nevada, Tennessee, Washington) have the highest population growth rates in the nation.

Thanks to an unfriendly business climate, the 10th highest tax burden, and public sector unions calling for $1 billion in new taxes, it’s no wonder economic growth is stagnant in the Commonwealth.

Yakovlev's study certainly comes as sobering news to high tax states across the country, including Pennsylvania. But the upside is a low-tax policy agenda can jump-start economic growth. 

posted by MICHAEL HOGG | 11:25 AM | Comments



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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.