What do real estate values and tax bills have in common? Both are driven by location. In a new report, the Tax Foundation provides a comprehensive analysis of the tax burdens faced by seven types of businesses in all 50 states. And the news for Pennsylvania isn't good.
Here’s how the foundation calculated the businesses’ tax rates, which determine each state’s rankings:
Tax Foundation economists designed seven model firms—a corporate headquarters, a research and development facility, an independent retail store, a capital-intensive manufacturer, a labor-intensive manufacturer, a call center, and a distribution center—and KPMG tax specialists calculated each firm’s tax bill in each state. This study accounts for all business taxes: corporate income taxes, property taxes, sales taxes, unemployment insurance taxes, capital stock taxes, inventory taxes, and gross receipts taxes. Additionally, each firm was modeled twice in each state: once as a new firm eligible for tax incentives and once as a mature firm not eligible for such incentives.
So how does Pennsylvania stack up to other states? If you guessed poorly, you’re correct. Check out Pennsylvania's tax rates for each of the seven businesses:
As the chart above reveals, only manufacturing businesses enjoy a relatively low tax burden because of how the tax rate is applied to manufacturers’ sales. Meanwhile, non-manufacturing businesses—like a corporate headquarters or distribution center—face some of the highest tax rates in the country.
Make no mistake: Tax rates matter. States with lower taxes see better job, income, and population growth. On the other hand, high tax states like Pennsylvania consistently struggle in these three categories. The state needs to chart a new economic course to empower both workers and entrepreneurs with life-changing opportunities.
We just can’t continue with the same old, same old.