Higher Income Taxes Will Cost Jobs

HARRISBURG, PA — Economists at the Beacon Hill Institute (BHI) at Suffolk University published a rebuttal to the Pennsylvania Budget and Policy Center’s (PBPC) criticism of the Pennsylvania State Tax Analysis Modeling Program (PA-STAMP).  

In June, the Commonwealth Foundation prepared analyses of increases in the Personal Income Tax using BHI’s PA-STAMP.  The model projected that that 24,000 private sector jobs would be lost as a result of a 16% increase in the Personal Income Tax.

The PBPC criticism, circulated to newspapers statewide, denied that higher taxes would cost Pennsylvania jobs and challenged the validity of the modeling program.  According to BHI, “[PBPC’s] statements betray an ignorance of elementary macroeconomic accounting principles,” and PBPC’s attack contained “numerous flaws” and exhibited a “thorough misunderstanding” of the PA-STAMP.

Specific points raised by the Beacon Hill Institute economists include:

  • PBPC claimed the “Commonwealth Foundation provided no information about its model or methodology, only results” in its news release.   Obviously the purpose of a news release is to spur further inquiry, not to be comprehensive in the presentation of the details of a complex economic modeling program.  However, had the PBPC asked for the methodology, data and results, it would have received it.  Or, had the PBPC simply looked for the information online, it would have found it.
  • PBPC relied on third-party criticism directed at a entirely different modeling program that has no bearing on PA-STAMP.  The cited critique was of a model that BHI built nine years ago for a different state using an entirely different methodology than that employed in PA-STAMP.
  • The accusation that PA-STAMP does not account for the effects of government spending and public sector job creation is wholly inaccurate.  In the Pennsylvania income tax simulation, the private sector job losses simply outweigh the public sector gains.

EDITOR’S NOTE: The Beacon Hill Institute’s 8-page response to the Pennsylvania Budget and Policy Center’s critique can be found here.

More Information:
Beacon Hill Institute Response to PBPC Criticism
PA-STAMP Methodology
Beacon Hill Institute
Rendell to Suspend Laws of Economics for Three Years  
Rendell’s 16% Income Tax Increase Will Cost 24,000 Jobs
Tax Everyone But the Guy Behind the Tree

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The Commonwealth Foundation is an independent, non-profit public policy research and educational institute based in Harrisburg, PA.