The commonwealth’s business tax climate is chilling. A report from the Tax Foundation ranks Pennsylvania on a variety of key taxes, putting the state at 34th overall.
On corporate income taxes, Pennsylvania ranked 43rd, largely because of the corporate net income tax, which is one of the highest in the country. Our unemployment insurance tax ranking is even worse—coming in at 46th. These taxes make Pennsylvania businesses significantly less competitive compared to low-tax states like Texas and Florida. This poor tax climate chases jobs, people, and money out of state.
The relatively good rankings in individual taxes (18th) and sales taxes (21st) helped boost the commonwealth’s overall ranking. In a recent report on Pennsylvania’s tax structure, the Tax Foundation detailed commonsense measures that can further improve our ranking.
These findings indicate there are many ways to improve the state’s tax climate. Elected officials can model reforms after those passed in states like North Carolina or at the federal level. The federal reforms have positively impacted the state, with dozens of Pennsylvania businesses offering bonuses, higher wages, and enhanced retirement benefits to their employees. Federal tax reform is boosting state tax collections too.
Increasing tax revenue shouldn’t be the purpose of tax reform, but it’s clear that reducing taxes can positively impact revenue collections. If the tax code encourages the creation and expansion of businesses, this will boost employment, expand the tax base, and raise revenue.
State lawmakers need to pursue polices that draw people and businesses to Pennsylvania. The simplest way to accomplish this is through a fair and competitive tax code that allows businesses and working people to thrive.