Economy

Recent Issues

Don't Wait on Washington for Manufacturing Jobs


During his campaign stops in Pennsylvania, President-elect Donald Trump touted his intention to bring manufacturing jobs back to the state. That’s a worthy goal, but the truth is the Keystone State doesn’t need to wait for a president of either party to start revitalizing its manufacturing sector.

How Does Pennsylvania's Tax Burden Compare?


Pennsylvania’s tax structure should benefit all Pennsylvanians, not just some. Unfortunately, our state’s stifling tax burden harms residents. Each year, government spending grows, increasing the pressure for higher taxes. These taxes weigh heavily on the state’s economy and lead to slow job and income growth. Lower taxes are the key to a stronger economy.

My Journey to Commonwealth Foundation’s Board


How did a registered Democrat and the daughter of former Democratic Governor George Leader find a place on Commonwealth Foundation’s Board? 


Recent Blog Posts

What the Soda Tax Can Teach us About the Budget

The high costs of Philadelphia's soda tax are mounting by the week. The Philadelphia Inquirer is reporting a 30-50 percent drop in beverage sales for some supermarkets and distributors. The drop in sales have employers talking about significant layoffs.

Jeff Brown, whose company manages six ShopRite stores, painted a sobering picture of how the tax has affected his employees:

Since January, Brown said, he has had to cut 6,000 employee hours...He said he suspects he will lose about 300 people, which amounts to one-fifth of his total workforce voluntarily and through layoffs in coming months.

What's all this have to do with Harrisburg?

Gov. Wolf's 2017-18 budget proposal mirrors Philadelphia's tax-and-spend approach. The governor is proposing more than $1 billion in tax hikes to pay for sizable increases in state spending. 

The governor defends his tax hikes by asserting his proposal “doesn’t raise taxes on people.” That sounds eerily familiar to Mayor Kenney's promises that the soda tax would be paid by distributors, not consumers. Mayor Kenney is blaming greed for the higher prices and layoffs, revealing a fundamental misunderstanding of how taxes affect workers.

In reality, a benign tax that was supposed to help fund pre-k and make Philadelphians healthier is putting people out of work and raising the cost of groceries. 

Philadelphia’s mistake should serve as stinging reminder that tax hikesno matter how seemingly inconsequential or justifiablecan hurt many of the people who can least afford to pay.

We need to look beyond tax hikes and address the real problem in our economy: Decades of red tape and uninterrupted transfers of wealth to government, both of which have diminished economic opportunties for working Pennsylvanians.

Gov. Wolf has put some good ideas on the table, but it's not enough. State government has to embrace innovation and leave the failed policies of the past behind.

.... Read More >

posted by Elizabeth Stelle, Bob Dick | 01:10 PM

Film Tax Credit Draws Bad Reviews

Be it Tom Cruise in Jack Reacher, Denzel Washington in Fences, or Gerard Butler in Law Abiding Citizen—everyone loves to see their favorite movie stars come to the neighborhood. This, combined with the promise of a local economic boost, provides plenty of incentive for Pennsylvania’s film tax credit program—which offers a 25 percent rebate on most film-related expenses. However, recent reporting shows the $60 million tax credit is inundated with waste, lacking oversight, and straying from legislative intent.

Reporter Eric Holmberg of Public Source obtained records for 339 film and television projects approved to receive 95 percent of tax credits allocated since 2007. Here are the major findings:

Pennsylvania productions received more than $116 million in tax credits. That’s more than one out of every five tax credit dollars, missing the program’s true intent to attract out-of-state productions.

Few productions use the tax credit; productions sell 99 percent of all film tax credits to companies that have nothing to do with film or TV. Essentially, the film tax credit is a backdoor tax break for some of the largest corporations and utilities operating in Pennsylvania.

Film tax credit dollars are frittered away in those transactions. The program wasted more than $27 million of taxpayer dollars by allowing credits to be sold to non-film companies, such as Apple. Secondary tax brokers also received thousands in fees from each transaction because of this arrangement.

Given Pennsylvania’s budget shortfall, it’s becoming nearly impossible to justify another year of this corporate welfare program. 

Fundamentally, the film tax credit is bad economics. The jobs it creates are relatively few and never permanent. It has largely failed to seed a permanent, successful native industry in Pennsylvania to work with outside studios.

Time and again, the film tax credit provides a net loss in economic activity. In Michigan, a review of the program’s performance in the 2010-2011 fiscal year found a net cost of $111.5 million. An earlier study from South Carolina found it generated only 19 cents in tax revenue for every dollar spent, which, according to the Tax Foundation, is close to the average return.

The lack of accountability is another issue plaguing the program. In 2014, an Auditor General’s report on the Pennsylvania agency tasked with overseeing the credits (DCED) concluded that "DCED did not provide true accountability and transparency." Attempts at clarification from DCED concerning its metrics for conducting and evaluating the program provided no answers at all, let alone “evidence that metrics even exist.”

Pennsylvania already leads the nation in corporate welfare. This distinction is unacceptable in light of the state’s persistent and immense budget challenges. It's time to reevaluate these programs and make better use of taxpayers’ funds. The film tax credit is a great place to start.

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posted by James Paul, Kris Malysz | 00:55 PM

The Inquirer's Problematic Budget Prescriptions

A Philadelphia Inquirer editorial urges optimism about the forthcoming state budget debate. It’s certainly well-warranted. Gov. Wolf and legislative leaders have repeatedly expressed interest in redesigning state government to avoid broad-based tax increases. This is a welcomed departure from past proposals to enact large tax hikes on working Pennsylvanians.

However, the governor still won’t completely rule out tax hikes. He’s likely to propose an energy tax to the delight of the Inquirer’s editorial board, which supports the tax as a way to make natural gas companies pay their “fair share.” This political slogan ignores all of the taxes natural gas companies already pay, including an impact fee, which effectively operates as a 6.9% severance tax.

The board also criticizes the tax relief extended to businesses, asserting this policy failed to stimulate job growth. Sure, businesses did see some relief through the elimination of the capital stock and franchise tax, but Pennsylvania’s overall tax burden ranks 15th highest in the nation. Weak job growth should be seen in light of the commonwealth’s broader tax and regulatory climate. The implication here is that a lower tax burden doesn't grow the economy. The evidence suggests just the opposite.

The editorial's assault on the state's tax structure continues:

Instead, the [tax] cuts lowered the public's quality of life by reducing revenue needed to educate children, fix roads, and provide other services. Business tax cuts account for about half the state's $600 million deficit.

These two sentences are plagued with problems. First, as CF has demonstrated in the past, more education spending does not necessarily lead to improved academic achievement. As a matter of fact, policymakers could improve the educational system while spending less on education if they embraced school choice.

Secondly, the state already has a dedicated source of funding to fix roads. That’s why the state’s gas tax jumped 8 cents to kick off the new year. If more money is needed for transportation, why not embrace public-private partnerships or repeal the prevailing wage mandate?

And third, placing blame for the deficit on tax cuts implies state government hasn’t taken enough out of the pockets of taxpayers. This flatly ignores the state’s overspending problem.

State spending has risen 46 of the last 47 years—climbing by $4,010 per person over that time. Had the state kept spending increases in line with inflation and population since 2000, it would have produced a budget surplus during this fiscal year. With spending increases possible each year, is it really reasonable to say Pennsylvania has a revenue problem?

Finally, the editorial suggests raising the minimum wage to improve residents’ quality of life and make Pennsylvania a destination state. But mandated wage hikes haven’t stop residents from fleeing other states. In fact, of the ten states that saw the biggest declines in state-to-state migration, nine had minimum wages exceeding the federal level. The only exception was Pennsylvania.

In contrast, of the ten states experiencing the largest increases in state-to-state migration, only half mandated wages above the federal minimum. The editorial board correctly identifies the importance of higher wages for Pennsylvania, but their policy prescription will ultimately undermine employment opportunities for the people who need it most.

Thankfully, Pennsylvania's dismal economic rankings are reversible. But turning the tide requires rejecting attempts to solve every problem with more government spending. What's the alternative? Robust economic growth driven by entrepreneurs and consumers pursuing their happiness.

.... Read More >

posted by Bob Dick | 04:01 PM